Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 21Directors’ annual retainers are paid each year following UTC’s Annual Meeting of Shareowners in April. New non-employee directors joining the Board after the Annual Meeting, but before the end of September, receive 100% of the annual retainer, while those joining the Board between October and the following April receive 50% of the annual retainer. Directors do not receive additional compensation for attending regularly scheduled Board and Committee meetings, but are paid an additional $5,000 for each special meeting attended in person. There were no special Board or Committee meetings attended by directors in person during 2016. ONE-TIME RSU AWARDS FOR NEW DIRECTORS Non-employee directors receive a one-time $100,000 restricted stock unit (“RSU”) award when first elected to the Board. This award vests in equal portions over five years and is distributed to the director in shares of UTC Common Stock upon retirement, termination or death. Messrs. Austin, Reynolds and Rogers each received this award in 2016. TREATMENT OF DIVIDENDS When UTC pays a dividend on Common Stock, each director is credited with additional DSUs and RSUs equal in value to the dividend paid on the corresponding number of shares of Common Stock. | Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 23 |
COMPENSATION OF DIRECTORS 2016 Director Compensation | NAME(1) | | FEES EARNED OR
PAID IN CASH ($) | | STOCK AWARDS ($)(2) | | ALL OTHER
COMPENSATION ($) | | | TOTAL ($) | | Edward A. Kangas(3) | | $192,000 | | $288,000 | | $947 | | | $480,947 | | Lloyd J. Austin III(4) | | $112,000 | | $268,000 | | $618 | | | $380,618 | | John V. Faraci | | $0 | | $305,000 | | $947 | | | $305,947 | | Jean-Pierre Garnier | | $0 | | $305,000 | | $947 | | | $305,947 | | Ellen J. Kullman | | $0 | | $300,000 | | $947 | | | $300,947 | | Marshall O. Larsen | | $112,000 | | $168,000 | | $1,022 | | | $281,022 | | Harold McGraw III | | $112,000 | | $168,000 | | $947 | | | $280,947 | | Richard B. Myers | | $124,000 | | $186,000 | | $947 | | | $310,947 | | Fredric G. Reynolds(5) | | $186,000 | | $379,000 | | $3,274 | | | $568,274 | | Brian C. Rogers(5) | | $0 | | $520,000 | | $3,274 | | | $523,274 | | H. Patrick Swygert | | $124,000 | | $186,000 | | $17,479 | (6) | | $327,479 | | André Villeneuve | | $124,000 | | $186,000 | | $947 | | | $310,947 | | Christine T. Whitman | | $0 | | $280,000 | | $834 | | | $280,834 |
Compensation| (1) | Ms. Bryant was elected to the Board of Directors effective January 1, 2017 and received no compensation in 2016. | | | | (2) | Stock Awards consist of the grant date fair value of DSU and RSU awards credited to the director’s account including, if applicable, the portion of the annual cash retainer that the director elected to receive as DSUs. DSUs and RSUs are calculated in accordance with the Compensation—Stock Compensation Topic of the FASB ASC. The assumptions made in the valuation of these awards can be found in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2016 Annual RetainerIn 2015,Report on Form 10-K. The number of units credited to each director in 2016 was calculated by dividing the compensationvalue of the award by $105.20, the NYSE closing price per share of UTC Common Stock on April 25, 2016, the date of the 2016 Annual Meeting. Directors who joined the Board following the Annual Meeting received the number of DSUs and RSUs based on the NYSE closing price of UTC Common Stock on the applicable appointment date. As of December 31, 2016, non-employee directors consisted of a retainer that was paid partially in cash and partially in deferred stock units (“DSUs”). Following termination of a non-employee director’s service onheld the following:
|
| Name | Unvested RSUs (#) | DSUs, Restricted Stock
and Vested RSUs (#) | | Edward A. Kangas | — | 36,631 | | Lloyd J. Austin III | 937 | 1,589 | | John V. Faraci | — | 45,597 | | Jean-Pierre Garnier | — | 83,693 | | Ellen J. Kullman | — | 14,798 | | Marshall O. Larsen | 254 | 14,117 | | Harold McGraw III | — | 49,878 | | Richard B. Myers | — | 28,744 | | Fredric G. Reynolds | 837 | 3,046 | | Brian C. Rogers | 837 | 4,451 | | H. Patrick Swygert | — | 58,452 | | André Villeneuve | — | 77,863 | | Christine T. Whitman | — | 34,506 |
| (3) | On September 14, 2016, the Board DSUs are converted into shareselected Mr. Hayes Chairman and designated Mr. Kangas as the Board’s Lead Director. | | | | (4) | General Austin was elected to the Board effective September 1, 2016. In accordance with the UTC Board annual retainer policy, he received the full amount of Common Stock, which can be distributed either in a lump-sum payment upon retirement or in ten- or fifteen-year installments.The following table shows the annual retainer for the April 2016 to April 2017 Board cycle in addition to the one-time $100,000 RSU award.
| | | | (5) | The amounts in effectshown for non-employee directorsMessrs. Reynolds and Rogers include 50% of the annual retainer for service fromthe April 2015 to April 2016:| Role | | Cash | | Deferred
Stock Units | | Total | | | Non-Executive Chairman of the Board | | $192,000 | | $288,000 | | $480,000 | | | Audit Committee Chair | | $128,000 | | $192,000 | | $320,000 | | | Audit Committee Member | | $124,000 | | $186,000 | | $310,000 | | | Committee on Compensation and Executive Development Chair | | $122,000 | | $183,000 | | $305,000 | | | Finance Committee Chair | | $122,000 | | $183,000 | | $305,000 | | | Committee on Nominations and Governance Chair | | $120,000 | | $180,000 | | $300,000 | | | Public Issues Review Committee Chair | | $120,000 | | $180,000 | | $300,000 | | | Non-Employee Director | | $112,000 | | $168,000 | | $280,000 | |
If a director served in multiple roles, his or her annual cash retainer2016 Board cycle and DSU award was based on the capacity for which the level of compensation was the highest. Non-employee directors receive 40% of the annual retainer in cash and 60% in DSUs, unless they elect to receive the entire retainer in DSUs. Directors do not receive additional compensation for attending regularly scheduled Board and Committee meetings. However, non-employee directors receive an additional $5,000 for each special meeting attended in person. There were no special Board or Committee meetings attended by directors in person during 2015.
One-Time RSU Awards for New Directors
Non-employee directors receive a one-time $100,000 restricted stock unit (“RSU”)RSU award, when first electedboth granted upon their election to the Board. This award vestsBoard effective January 1, 2016.
| | | | (6) | Consists of a premium payment on a life insurance policy used to fund Mr. Swygert’s participation in equal portions over five years andthe Directors’ Charitable Gift Program. Mr. Swygert is distributed to the only non-employee director in shares offor whom UTC Common Stock upon retirement, termination or death. No director received a RSU award in 2015.Treatment of Dividends
When UTCstill pays a dividend on Common Stock, each director is credited with additional DSUspremium because this program was closed to directors elected after February 2003. Mr. Swygert derives no financial benefit from this program. All insurance proceeds are payable to up to four charitable organizations designated by him and RSUs equal in valuetax deductions accrue solely to the dividend paid on the corresponding number of shares of Common Stock.
22 |  |
COMPENSATION OF DIRECTORS
2015 DIRECTOR COMPENSATION(1)
| Name | | Fees Earned or
Paid in Cash ($) | (2) | | Stock Awards ($) | (3) | | All Other
Compensation ($) | | Total ($) | | | Edward A. Kangas | | $192,000 | | | $288,000 | | | $1,107 | | $481,107 | | | John V. Faraci | | $0 | | | $305,000 | | | $1,107 | | $306,107 | | | Jean-Pierre Garnier | | $0 | | | $305,000 | | | $1,107 | | $306,107 | | | Ellen J. Kullman | | $0 | | | $310,000 | | | $1,107 | | $311,107 | | | Marshall O. Larsen | | $0 | | | $280,000 | | | $1,144 | | $281,144 | | | Harold McGraw III | | $112,000 | | | $168,000 | | | $1,107 | | $281,107 | | | Richard B. Myers | | $124,000 | | | $186,000 | | | $1,107 | | $311,107 | | | H. Patrick Swygert | | $124,000 | | | $186,000 | | | $17,640 | (4) | $327,640 | | | André Villeneuve | | $0 | | | $310,000 | | | $1,107 | | $311,107 | | | Christine T. Whitman | | $120,000 | | | $180,000 | | | $1,107 | | $301,107 | |
(1) | Messrs. Reynolds and Rogers were elected to the Board of Directors effective January 1, 2016. No compensation was paid to either director for services performed in 2015. | | | (2) | Consists of the 2015 annual cash retainer that directors did not elect to receive in DSUs. | | | (3) | Consists of the grant date fair value of DSU awards credited to the account of the director, including the portion, if any, of the annual cash retainer that the director elected to receive in DSUs, in each case calculated in accordance with the Compensation—Stock Compensation Topic of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”). The assumptions made in the valuation of these awards can be found in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2015 Annual Report on Form 10-K. The number of DSUs credited to each director in 2015 was calculated by dividing the cash value of the DSU portion of the director’s annual retainer by $115.74, the NYSE closing price per share of UTC Common Stock (“Common Stock”) on April 27, 2015, which was the date of the 2015 Annual Meeting. As of December 31, 2015, non-employee directors held the following:UTC. |
| | | Number of Unvested RSUs from the | | Number of DSUs, Restricted | | | Name | | One-Time $100,000 RSU Grant | | Stock and Vested RSUs | | | Edward A. Kangas | | — | | 32,994 | | | John V. Faraci | | — | | 41,575 | | | Jean-Pierre Garnier | | — | | 78,877 | | | Ellen J. Kullman | | — | | 11,595 | | | Marshall O. Larsen | | 254 | | 12,170 | | | Harold McGraw III | | — | | 47,042 | | | Richard B. Myers | | — | | 26,268 | | | H. Patrick Swygert | | — | | 55,231 | | | André Villeneuve | | — | | 74,277 | | | Christine T. Whitman | | — | | 30,997 | |
(4) | Consists of a premium payment on a life insurance policy used to fund Mr. Swygert’s participation in the Directors’ Charitable Gift Program. Mr. Swygert is the only non-employee director for whom UTC still pays a premium, as this program was closed to directors elected after February 2003. Mr. Swygert derives no financial benefit from this program. All insurance proceeds are payable to up to four charitable organizations designated by him and tax deductions accrue solely to UTC. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 23| 24 |  |
Stock Ownership Information Directors and Executive Officers The following table shows the number of shares of Common Stock beneficially owned as of February 28, 2017 by: (a) our current directors; (b) the Named Executive Officers listed in the Summary Compensation Table on page 60 of this Proxy Statement; and (c) our directors and current executive officers as a group. None of the directors or the Named Executive Officers nor the Company’s directors and executive officers as a group beneficially owned more than 1% of the outstanding shares of Common Stock as of that date. Except as explained in the footnotes to the following table, each person listed, had sole voting and investment power with respect to the shares shown. | Name | | Shares Beneficially Owned | | E. Kangas | | 36,631 | | L. Austin III | | 1,589 | | D. Bryant | | 1,399 | | J. Faraci | | 45,597 | | J. Garnier | | 95,403 | | G. Hayes(1) | | 237,487 | | E. Kullman | | 14,798 | | M. Larsen(2) | | 19,549 | | H. McGraw III | | 53,483 | | R. Myers | | 28,744 | | F. Reynolds | | 16,271 | | B. Rogers | | 9,451 | | H. Swygert | | 58,452 | | A. Villeneuve | | 77,863 | | C. Whitman | | 41,356 | | P. Delpech | | 44,081 | | A. Johri | | 49,566 | | R. Leduc | | 75,551 | | R. McDonough | | 51,224 | | Directors & Executive Officers as a group (25 in total)(3)(4)(5) | | 1,259,217 |
| | | (1) | Includes 2,129 shares of Common Stock for which Mr. Hayes’ spouse holds voting and investment power. | | | | (2) | Includes 5,432 shares of Common Stock for which Mr. Larsen’s spouse shares voting and investment power. | | | | (3) | Consists of holdings of those directors and executive officers who serve in such positions as of February 28, 2017. A complete list of UTC’s current executive officers is included in the Company’s Annual Report on Form 10-K for 2016. | | | | (4) | Includes 6,586 shares of Common Stock for which the spouse of an executive officer who is not a Named Executive Officer shares voting and investment power. | | | | (5) | Includes 1,546 shares of Common Stock for which the spouse of an executive officer who is not a Named Executive Officer holds voting and investment power. |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 25 |
STOCK OWNERSHIP INFORMATION The amounts in the preceding table include stock units credited to the account of the officer under the Savings Restoration Plan that are attributable to Company contributions to match 60% of the officer’s payroll contributions to his or her account under the Plan and which are settled in shares of Common Stock following the officer’s retirement or other termination of employment.(1) The following table shows the shares (included within the amounts shown in the preceding chart) in which the listed person or the members of the group had the right to acquire beneficial ownership at any time within 60 days after February 28, 2017 by exercising SARs or stock options and, in the case of non-management directors, upon the settlement of RSUs or DSUs as a result of their resignation or retirement from the Board: | Name | | Shares as to which listed
person has right to acquire
beneficial ownership
within 60 days by exercise of
stock options or SARs(2) | | Shares as to which listed
person has right to acquire
ownership within 60 days
upon conversion of RSUs | | Shares as to which listed
person has right to acquire
ownership within 60 days
upon conversion of DSUs | | L. Austin III | | – | | 6 | | 1,583 | | D. Bryant | | – | | – | | 1,399 | | J. Faraci | | – | | 2,247 | | 43,350 | | J. Garnier | | – | | – | | 77,293 | | G. Hayes | | 122,500 | | – | | – | | E. Kangas | | – | | 2,529 | | 34,102 | | E. Kullman | | – | | 1,459 | | 13,339 | | M. Larsen | | – | | 1,146 | | 12,971 | | H. McGraw III | | – | | 3,001 | | 46,877 | | R. Myers | | – | | 1,983 | | 26,761 | | F. Reynolds | | – | | 237 | | 2,809 | | B. Rogers | | – | | 237 | | 4,214 | | H. Swygert | | – | | 3,759 | | 54,693 | | A. Villeneuve | | – | | – | | 73,063 | | C. Whitman | | – | | 3,001 | | 31,505 | | P. Delpech | | 5,960 | | – | | – | | A. Johri | | 31,961 | | – | | – | | R. Leduc | | 20,772 | | – | | – | | R. McDonough | | 40,175 | | – | | – | | Directors & Executive Officers as a group (25 in total)(3) | | 401,947 | | 19,605 | | 423,959 |
| | | (1) | The following executive officers held as of February 28, 2017 the following amounts of stock units under the Savings Restoration Plan: G. Hayes, 5,995; A. Johri, 976; and R. Leduc, 939; and the current executive officers as a group held 22,418 units. | | | | (2) | For the executive officers, includes the net number of shares of Common Stock beneficially owned, asissuable upon exercise of February 29, 2016, by: (a) our current directors,vested SARs. Following vesting, each SAR is exercisable for a number of whom isshares of Common Stock having a nominee for election asvalue equal to the increase in value of a director, (b)share of Common Stock from the Named Executive Officers listed indate the Summary Compensation Table on page 57SAR was granted through the date of exercise. For purposes of this Proxy Statement, and (c) our directors and current executive officers as a group. Each director and executive officer, andtable, the net number of shares of Common Stock issuable upon exercise has been calculated using the NYSE closing price on the last trading day of 2016 of $109.62 per share of Common Stock. | | | | (3) | Consists of holdings of those directors and executive officers who serve in such positions as a group, beneficially owned less than 1%of February 28, 2017. A complete list of UTC’s executive officers is included in the Company’s Annual Report on Form 10-K for 2016. |
| 26 | |
STOCK OWNERSHIP INFORMATION Beneficial Owners of More Than 5% of UTC Common Stock The following table shows all holders known to UTC to be beneficial owners of more than 5% of the outstanding shares of Common Stock as of December 31, 2016. | Name and Address | | Shares | | Percent of Class | State Street Corporation(1)
State Street Financial Center
One Lincoln Street
Boston, MA 02111 | | 95,415,778 | | 11.8% | The Vanguard Group(2)
100 Vanguard Boulevard
Malvern, PA 19355 | | 52,271,957 | | 6.5% | BlackRock, Inc.(3)
55 East 52ndStreet
New York, NY 10022 | | 43,445,686 | | 5.4% |
| (1) | State Street Corporation, acting in various fiduciary capacities, reported in an SEC filing that as of December 31, 2016, it held sole voting power with respect to zero shares of Common Stock, as of that date. Except as explained in the footnotes to the following table, each person listed, and the members of the group, had soleshared voting power and sole investment power with respect to the shares shown.Name | | Shares Beneficially Owned | John V. Faraci | | 41,575 | Jean-Pierre Garnier | | 90,587 | Gregory J. Hayes(1) | | 230,881 | Edward A. Kangas | | 32,994 | Ellen J. Kullman | | 11,595 | Marshall O. Larsen | | 17,856 | Harold McGraw III | | 50,647 | Richard B. Myers | | 26,268 | Fredric G. Reynolds | | 15,254 | Brian C. Rogers | | 2,511 | H. Patrick Swygert | | 55,231 | André Villeneuve | | 74,277 | Christine T. Whitman | | 37,847 | Paul Adams(2) | | 44,803 | Alain M. Bellemare(3) | | 82,724 | Geraud Darnis(4) | | 365,220 | Charles D. Gill, Jr.(5) | | 173,597 | Akhil Johri | | 43,864 | Directors & Executive Officers as a group (23 in total)(6) | | 1,238,922 |
(1) | Includes 2,103 shares of Common Stock for which Mr. Hayes’ spouse holds voting and investment power. | | | (2) | Paul Adams retired from the Company effective February 29, 2016. | | | (3) | Alain M. Bellemare retired from the Company effective January 31, 2015. | | | (4) | Geraud Darnis retired from the Company effective January 31, 2016. | | | (5) | Includes 1,546 shares of Common Stock for which Mr. Gill’s spouse holds voting and investment power. | | | (6) | Consists of holdings of those directors and executive officers who continue to serve in such positions as of February 29, 2016 and, therefore, excludes the holdings of Messrs. Adams, Bellemare and Darnis. This line includes holdings of eight current executive officers in addition to those required to be listed by name in this table. A complete list of UTC’s current executive officers is included in the Company’s Annual Report on Form 10-K for 2015. |
24 | |
STOCK OWNERSHIP INFORMATION
The preceding table includes shares as to which the listed person or the members of the group had the right to acquire beneficial ownership at any time within 60 days after February 29, 2016 by exercising stock appreciation rights (“SARs”) or stock options and, in the case of non-management directors, upon the settlement of restricted stock units (“RSUs”) or deferred stock units (“DSUs”) as a result of their resignation or retirement from the Board, as set forth in the following table. The amounts in the preceding table also include, for all but two of the executive officers, stock units credited to the account of the officer under the Savings Restoration Plan that are attributable to Company contributions to match 60% of the officer’s payroll contributions to his or her account under the Plan, and which are settled in95,415,778 shares of Common Stock, following the officer’s retirement or other termination of employment.(1)
| Name | | Shares as to which
listed person has right to
acquire beneficial ownership
within 60 days by exercise
of stock options or SARs | (2) | | Shares as to which listed
person has right to acquire
ownership within 60 days
upon conversion of RSUs | | Shares as to which listed
person has right to acquire
ownership within 60 days
upon conversion of DSUs | | | J. Faraci | | — | | | 2,191 | | 39,384 | | | J. Garnier | | — | | | — | | 72,477 | | | G. Hayes | | 135,534 | | | — | | — | | | E. Kangas | | — | | | 2,465 | | 30,529 | | | E. Kullman | | — | | | 1,422 | | 10,173 | | | M. Larsen | | — | | | 1,365 | | 11,059 | | | H. McGraw III | | — | | | 2,926 | | 44,116 | | | R. Myers | | — | | | 1,934 | | 24,334 | | | F. Reynolds | | — | | | 1,046 | | 983 | | | B. Rogers | | — | | | 1,046 | | 1,465 | | | H. Swygert | | — | | | 3,665 | | 51,566 | | | A. Villeneuve | | — | | | — | | 69,477 | | | C. Whitman | | — | | | 2,926 | | 28,071 | | | P. Adams | | 39,724 | | | — | | — | | | A. Bellemare | | 45,246 | | | — | | — | | | G. Darnis | | 214,357 | | | — | | — | | | C. Gill, Jr. | | 126,275 | | | — | | — | | | A. Johri | | 26,813 | | | — | | — | | | Directors & Executive Officers as a group (23 in total)(3) | | 453,554 | | | 20,986 | | 383,634 | |
(1) | The following executive officers held as of February 29, 2016 the following amounts of stock units under the Savings Restoration Plan: G. Hayes, 4,496; P. Adams, 1,617; A. Bellemare, 2,626; G. Darnis, 3,173; C. Gill, Jr., 6,783; A. Johri, 654 units, respectively; and the current executive officers as a group held 16,860 units. | | | (2) | For the executive officers, includes the net number of shares of Common Stock issuable upon exercise of vested SARs. Following vesting, each SAR is exercisable for a number of shares of Common Stock having a value equal to the increase in value of a share of Common Stock from the date the SAR was granted through the date of exercise. For purposes of this table, the net number of shares of Common Stock issuable upon exercise has been calculated using the NYSE closing price for a share of Common Stock on December 31, 2015, which was $96.07. | | | (3) | Consists of holdings of those directors and executive officers who continue to serve in such positions as of February 29, 2016 and, therefore, excludes holdings of Messrs. Adams, Bellemare and Darnis. This line includes holdings of eight current executive officers in addition to those required to be listed by name in this table. A complete list of UTC’s current executive officers is included in the Company’s Annual Report on Form 10-K for 2015. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 25 |
STOCK OWNERSHIP INFORMATION
Beneficial Owners of More Than 5% of UTC Common Stock
The following table shows all holders knownsole dispositive power with respect to us to be beneficial owners of more than 5% of the outstandingzero shares of Common Stock, and shared dispositive power with respect to 95,415,778 shares of Common Stock. State Street Corporation also reported that its wholly-owned subsidiary, State Street Bank & Trust Company, held 55,870,427 of these shares in its capacity as Trustee for UTC’s Employee Savings Plan Master Trust. State Street Corporation disclaims beneficial ownership of the reported shares, except in its fiduciary capacity.
| | | | (2) | The Vanguard Group, reporting on behalf of various subsidiaries, reported in an SEC filing that as of December 31, 2015.| Name and Address | | Shares | | Percent of Class | | State Street Corporation(1) | | 99,702,863 | | 11.9% | | State Street Financial Center | | | | | | One Lincoln Street | | | | | | Boston, MA 02111 | | | | | | The Vanguard Group(2) | | 51,558,180 | | 6.2% | | 100 Vanguard Boulevard | | | | | | Malvern, PA 19355 | | | | | | BlackRock, Inc.(3) | | 48,153,780 | | 5.7% | | 55 East 52nd Street | | | | | | New York, NY 10022 | | | | |
(1) | State Street Corporation, acting in various fiduciary capacities, reported in an SEC filing that as of December 31, 2015 it held sole voting power with respect to zero shares of Common Stock, shared voting power with respect to 99,702,863 shares of Common Stock, sole dispositive power with respect to zero shares of Common Stock, and shared dispositive power with respect to 99,702,863 shares of Common Stock. State Street Corporation also reported that its wholly-owned subsidiary, State Street Bank & Trust Company, held 61,441,100 of these shares in its capacity as Trustee for UTC’s Employee Savings Plan Master Trust. State Street Corporation disclaims beneficial ownership of the reported shares, except in its fiduciary capacity. | | | (2) | The Vanguard Group, reporting on behalf of various subsidiaries, reported in an SEC filing that as of December 31, 2015 it held sole voting power with respect to 1,548,916 shares of Common Stock, shared voting power with respect to 83,500 shares of Common Stock, sole dispositive power with respect to 49,916,427 shares of Common Stock, and shared dispositive power with respect to 1,641,7532016, it held sole voting power with respect to 1,216,501 shares of Common Stock, shared voting power with respect to 146,445 shares of Common Stock, sole dispositive power with respect to 50,916,935 shares of Common Stock, and shared dispositive power with respect to 1,355,022 shares of Common Stock. | | | | (3) | BlackRock, Inc., reporting on behalf of various subsidiaries, reported in an SEC filing that as of December 31, 2016, it held sole voting power with respect to 36,912,679 shares of Common Stock, shared voting power with respect to 777 shares of Common Stock, sole dispositive power with respect to 43,444,909 shares of Common Stock, and shared dispositive power with respect to 777 shares of Common Stock. | | | (3) | BlackRock, Inc., reporting on behalf of various subsidiaries, reported in an SEC filing that as of December 31, 2015 it held sole voting power with respect to 40,104,635 shares of Common Stock, shared voting power with respect to zero shares of Common Stock, sole dispositive power with respect to 48,153,780 shares of Common Stock, and shared dispositive power with respect to zero shares of Common Stock. |
26 | |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 27 |
Executive Compensation: Compensation Discussion and Analysis In this section, we discuss our compensation philosophy and describe the compensation program for our President and Chief Executive Officer (“CEO”) and Executive Leadership Group (“ELG”). We explain how our Board’s Committee on Compensation and Executive Development (the “Committee”) determines compensation for our senior executives and its rationale for specific 2015 pay decisions. We also discuss the evolution of our program and how it is structured to advance its fundamental objective: aligning our executives’ compensation with the long-term interests of UTC shareowners.
Executive Summary
We design our program to reward financial performance and effective strategic leadership, key elements in building sustainable value for shareowners. We believe that the performance metrics used in our incentive plans align the interests of our shareowners and senior executives by correlating the timing and amount of actual pay to our short-, medium- and long-term performance. Our program requires ethical and responsible conduct in pursuit of these goals.
In addition, we carefully benchmark our executive compensation program against a relevant group of peer companies—all of which are potential competitors for the caliber of executive talent required to manage a complex, global and multi-industrial company like UTC.
Response to 2015 Say-on-Pay Vote
In this section, we discuss our compensation philosophy and describe the compensation program for our Chairman & Chief Executive Officer (“CEO”) and our Executive Leadership Group (“ELG”). We explain how our Board’s Committee on Compensation and Executive Development (the “Committee”) determines compensation for our senior executives and its rationale for specific 2016 pay decisions. We also discuss the evolution of our program and how it is structured to advance its fundamental objective: aligning our executives’ compensation with the long-term interests of UTC shareowners. Executive Summary We design our program to reward financial performance and effective strategic leadership, key elements in building sustainable shareowner value. The performance metrics used in our incentive plans align the interests of our senior executives with our shareowners by correlating the timing and amount of actual payouts to our short-, medium- and long-term performance. Our program requires ethical and responsible conduct in pursuit of these goals. In addition, we carefully benchmark our executive compensation program against a relevant group of peer companies—all of which are potential competitors for the caliber of executive talent required to manage a complex, global, multi-industry company like UTC. RESPONSE TO 2016 SAY-ON-PAY VOTE Each year, we consider the voting results of our Say-on-Pay proposal from the preceding year. In 2015, 95%2016, 96% of the votes submitted (excluding abstentions and broker non-votes) supported the Committee’s 20142015 executive compensation decisions, a result that slightly exceeded the 93%95% favorable vote we received in 2014.2015. We interpreted this result, along with our positive four-year voting trend, as an endorsement of our compensation program’s design and direction. | | 96%
support |
OUR 2016 SHAREOWNER OUTREACH EFFORTS We actively seek and highly value feedback from shareowners and their advisors concerning our compensation program. During the year, senior management communicated directly with institutional investors holding approximately 300 million shares of UTC Common Stock. ANALYSIS OF SHAREOWNER FEEDBACK As it does each year, the Committee considered shareowner feedback in its ongoing assessment of our compensation program. This feedback, along with factors such as external market data and staff compensation recommendations, helped the Committee in its review of our program. Our 2015 Outreach Program
| 28 | |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis 2016 PERFORMANCE OVERVIEW Our senior leadership team continued its focus on innovation, execution, cost reduction and disciplined capital allocation. We believe these key priorities promote long-term, sustainable growth and contributed to the following 2016 financial, strategic and operational accomplishments: PRATT & WHITNEY • Awarded a $1.5 billion contract by the U.S. Department ofDefense for the F135 propulsion systems that power allthree variants of Lockheed Martin’s F-35 Lightning II aircraft. • The U.S. Air Force declared Initial Operational Capabilityfor the F-35A Lightning II, powered by Pratt & Whitney’sF135 engine. • Announced as engine provider for the U.S. Air Force’sB-21 Raider. • Entries into service of the Airbus A320neo andBombardier C Series aircraft and the first flight of theEmbraer E-Jet E2, all of which are powered by Pratt &Whitney’s PurePower GTF engines. • Received Federal Aviation Administration and EuropeanAviation Safety Agency certification of the Airbus A321neo,powered by Pratt & Whitney’s PurePower GTF engines. • Increased total firm and option orders of the GTF engineto more than 8,000. UTC CLIMATE, CONTROLS & SECURITY (“UTC CCS”) • Launched 132 new products during 2016, including thelatest generation of AquaForce chillers and heat pumps,which use a low Global Warming Potential refrigerant thatcan deliver up to 5% better efficiency and reducegreenhouse gas emissions by up to 10% as compared toconventional chillers and heat pumps. • Acquired a controlling interest in Riello Group S.p.A., aleader in heating products and services with operations inover 60 countries. • Significant contract wins in 2016 included: Design and installation of security and extra low voltagesystems for the Lisboa Palace project, a resort inMacau, China. Installation of security management, electronic accesscontrol, intrusion system and electric fence solutions toPowerlink Queensland, an Australian electricityinfrastructure provider.
OTIS • Launched a digital service strategy aimed at achieving amore efficient and responsive customer service model. • Increased engineering investment, enabling Otis to nearlydouble the number of products launched in 2016compared to 2015. • Introduced the next generation of the Gen2 elevator,which increases space and energy efficiency and makesgreater connectivity available through Otis service offerings. • Significant contract wins in 2016 included: 67 Otis elevators and escalators to be installed in theQian Hai International Financial Centre in Shenzhen,China, including 40 SkyRise and 11 Gen2 elevators. 67 Otis elevators and escalators, including the fastestSkyRise double-deck elevators in Europe, to besupplied to the Twentytwo Bishopsgate developmentin London, England. UTC AEROSPACE SYSTEMS (“UTAS”) • Commenced development and production work forHawaiian Airlines’ Airbus A330 and Boeing 717 and 767fleets, which will employ UTAS’ Electronic Flight Bagsystems that enhance functionality, safety andcybersecurity. • Began delivering new wheels and brakes for 475 U.S. AirForce F-15 aircraft. Through the use of UTAS’ proprietaryDURACARB carbon heat sink material, these new brakesare expected to provide four times longer life than conventional carbon brakes. • Entered into an agreement with Emirates Airlines toprovide inventory support, maintenance, repair andoverhaul of components and systems for its AirbusA380 fleet. • Demonstrated mission readiness of the MS-177 long-range imaging sensor systems by completing a series ofhigh-altitude flight demonstrations – performingsuccessfully in both land and maritime environments.
We actively seek and highly value feedback from shareowners and their advisors concerning our compensation program. Since our last
Notice of 2017 Annual Meeting of Shareowners senior management has communicated directly with institutional investors holding approximately 300 million shares of UTC Common Stock (“Common Stock”).Analysis of Shareowner Feedback
As it does each year, the Committee considered shareowner feedback in its ongoing assessment of our compensation program. This feedback, along with factors such as external market data and staff compensation recommendations, helps the Committee in its review of our program.
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 27Proxy Statement | 29 |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
2015 PERFORMANCE
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis 2016 FINANCIAL RESULTS* UTC delivered solid financial performance in 2016, as evidenced by the 35% increase in diluted earnings per share (“EPS”) and the 5% increase in adjusted EPS, as well as the 2% growth in net sales from continuing operations, adjusted net sales and organic sales. Additionally, we increased dividends paid per share to shareowners during the year by 2.3%, and returned $4.3 billion to shareowners through a combination of dividends and share repurchases. During 2015, UTC implemented a significant business transformation, driven by
 | 2016 was the $9 billion sale of Sikorsky Aircraft and the elimination of UTC Propulsion & Aerospace Systems (“UTC PAS”) and UTC Building & Industrial Systems (“UTC BIS”), as organizational layers within our management structure. UTC is now comprised of four distinct business units reporting directly 80th
consecutive year
we paid dividends
to the CEO, providing increased transparency and a more direct focus on operational performance (for an illustration of these structural changes, see page ii). We believe this simplified structure better positions us to deliver:shareowners |
FLAWLESS PROGRAM| GAAP Financial Measures | | EFFECTIVE ALLOCATION | | A CULTURE OF TRUST | EXECUTION | | OF CAPITAL | | AND ACCOUNTABILITY | | | | Non-GAAP Financial Measures* | | | Net Sales by Business Unit | | | Adjusted Net Sales by Business Unit | | | | | |
With this renewed focus, we successfully executed on a number of strategic and operational objectives during 2015 that we believe will position us for long-term, sustainable growth, including:
 | |  | |
* See Appendix A on pages 87-88 for additional information regarding these non-GAAP financial measures. | 30 | |
• | Pratt & Whitney’s PurePower PW1000G engine with Geared Turbofan (“GTF”) technology obtained FAA and EASA certification in 2015 and entered into service with Lufthansa Airlines in early 2016. The GTF is a revolutionary engine that decreases fuel burn by 16%, noise by 75% and air pollutant emissions by 50%. With approximately 7,000 orders to-date (including options), this entry into service is a significant operational accomplishment, which is expected to provide us with revenue streams for decades. | | | • | UTC Aerospace Systems supplies the electric power, air supply, landing and fuel sensing systems for Boeing’s KC-46A tanker, which made its first flight in 2015. We also supply the engine controls, fuel metering unit and other accessories for the tanker’s Pratt & Whitney PW4062 engines. |
| | | • | Sale of our Sikorsky Aircraft business unit, which we executed on an accelerated basis, allowing greater focus on our core businesses and future growth potential. | | | • | Otis received orders for significant key projects in China–examples include 133 elevators and escalators to be provided to the Chengdu Metro Line and a contract to supply 174 elevators and escalators to a new landmark commercial building in Ningbo, East China. | | | • | UTC CCS won its largest retrofit contract to date for the CP Tower in Kuala Lumpur, Malaysia. | | | • | Otis was selected to provide elevators and escalators with leading energy-efficient technologies to the landmark New York City Hudson Yards development project. |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis SHAREOWNER VALUE CREATION The Committee believes that long-term incentives should correlate directly with the creation of long-term shareowner value. This correlation is a fundamental component of our Guiding Principles (as discussed on page 34). We believe our ability to generate strong TSR over long-term periods has been, in part, driven by the design of our executive compensation program. This can be seen in UTC’s 8.3% annualized TSR over the ten-year period ending on December 31, 2016, which exceeded the returns of the Dow Jones Industrial Average (7.5%), the S&P 500 Index (6.9%) and the companies within our Compensation Peer Group (“CPG”) (6.8%). The following chart illustrates UTC’s performance compared to the CPG and these major market indices over varying time periods. TOTAL SHAREOWNER RETURN: UTC COMPARISONS* 
| * | TSR values are provided by S&P Capital IQ, and are calculated on an annualized basis as of December 31, 2016. The CPG composite returns are calculated for each peer company, and then a weighted average is applied based on each company’s market capitalization at the beginning of the measurement period. |
Notwithstanding these strategic
Notice of 2017 Annual Meeting of Shareowners and operational accomplishments, significant investments in the GTF engine, adverse foreign exchange rates and slowed growth in China contributed to a decrease in adjusted net income and diluted EPS for continuing operations, as shown in the charts on the following page.Despite these near-term pressures, UTC increased dividends paid to shareowners by 8.5% in 2015. This represents the 79thconsecutive year in which UTC has paid dividends. Consistent with our disciplined capital allocation strategy, we also returned $12 billion to shareowners through dividends and share repurchases (including a $6 billion accelerated share buyback program announced in November 2015). In addition, we initiated a $1.5 billion multi-year structural cost reduction plan. These actions are intended to contribute to long-term sustainable growth while responding to near-term economic and financial challenges.
28 | | 31 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis FINANCIAL RESULTS
Adjusted Net Sales(1) | Adjusted Diluted EPS(1) | Free Cash Flow(2) | Adjusted Net Income(1) | (in billions) | | (in billions) | (in billions) | | | | |  |
(1) | Reflects continuing operations, adjusted to exclude restructuring, non-recurring and other significant, defined non-operational items. A reconciliation to these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure for each of the three years shown is set forth in Appendix B on page 86. | (2) | Reflects continuing operations. |
SHAREOWNER VALUE CREATION
The Committee believes that long-term incentives should correlate directly with the creation of long-term shareowner value. This correlation is a fundamental component of our Guiding Principles, as discussed on page 33. We believe our ability to generate strong TSR over long-term periods has been, in part, driven by the design of our executive compensation program. This can be seen in UTC’s 7.9% annualized TSR over the ten-year period ending on December 31, 2015, which exceeded the Dow Jones Industrial Average (7.7%), the S&P 500 (7.3%) and our Compensation Peer Group (6.9%) (our (“CPG”) is detailed on page 35). Our Board of Directors and senior management are strongly committed to positioning UTC for long-term sustainable growth even while facing near-term earning headwinds, which have adversely affected TSR over shorter time periods relative to peers. The following chart illustrates UTC’s performance relative to differing comparator groups and time periods.
TOTAL SHAREOWNER RETURN: UTC VS. PEER GROUPS*
* | TSR values are provided by S&P Capital IQ and are calculated on an annualized basis as of December 31, 2015. For the CPG composite values, returns are calculated for each peer company and then a weighted average is calculated based on each company’s market capitalization at the beginning of the measurement period. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 29 |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
For our CEO and other NEOs, the Committee’s 2015 compensation decisions, as described in detail on pages 50 to 54, recognize both the near-term results and the strategic and operational accomplishments previously discussed in this section.
CEO PAY OVERVIEW Mr. Hayes’ 20152016 total direct compensation as defined on page 47, decreased by 1.8%increased from $10.93$10.82 million in 20142015 to $10.73$14.97 million in 2015.2016. This decreaseincrease was primarilypartially driven by the decreaseincrease in the Company’s annual bonus financial performance factor from 112%39% of target in 20142015 to 39%120% in 2015.2016. This performance resulted in the Committee approving an $850,000a $3 million annual bonus for Mr. Hayes, an amount which substantiallyclosely aligned with this financial performance factor, but was belowfactor. The Committee also increased Mr. Hayes’ base salary during the year from $1.3 to $1.5 million to better align his base salary with the CPG median. The Committee favorably assessed Mr. Hayes’ 20152016 performance (discussed in detail on page 50)54). Based on this assessment, the Committee increased Mr. Hayes’ 20162017 long-term incentive grantaward to $8.58$10.47 million. While this amount was greater than the $8.03$8.67 million grant awardedaward granted to Mr. Hayes in 2015,2016, his 20162017 grant value wasremains below the CPG median, reflecting Mr. Hayes’ briefhis short tenure as CEO. CEO TOTAL DIRECT COMPENSATION(1)  
| (1) | The elements of total direct compensation are described in detail on page 4750 of this Proxy Statement. 2013 total direct compensation reflects the Committee’s pay decisions with respect to Mr. Hayes’ former role as Senior Vice President & Chief Financial Officer. | | | | | (2) | GrantThe grant date fair value of Mr. Hayes’ January 4, 20163, 2017 LTI award, calculated in accordance with the Compensation—Stock Compensation Topic of the FASB ASC, but excluding the effects of estimated forfeitures. This grant consists of 264,000151,000 SARs, 50,500 PSUs and 53,000 PSUs,20,500 RSUs, and is based on the $95.57$110.83 NYSE closing price of ourUTC Common Stock on the date of grant. |
3032 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis Our Core Executive Compensation Practices WeThe Committee continually monitormonitors the evolution of best compensation practices and makehas made a number of program changes to our programs asover the years, when necessary, to ensure sound corporate governance. Some of theour most important practices incorporated into our programand policies include:
| What We Do | | What We Don’t Do | Review of Align Pay Versusand Performance.The Committee continually reviews the relationship between CEO compensation and Company performance, as detailed on pages 4649 to 49.53.
Median Compensation Targets.Each of the principal elements of compensation (as discussed(discussed on page 36) for our executives37) is targeted at the median of market.
Rigorous and Diversified Performance Metrics. The Committee annually reviews performance goals for our annual and long-term incentive awardsprograms to confirmensure that we are usinguse diversified metrics with rigorous but attainable targets. Beginning with the 2016 LTI grant, the addition of ROIC willto our PSUs further diversifydiversifies the performance metrics used for PSU awards.we use.
Clawback of Compensation.We continue to monitor our clawback policy on an ongoing basis and make enhancements as necessary. In this regard, weappropriate. We have made revisions twice since 2011 to further strengthen ourthis policy.
Substantial Share Ownership Guidelines.
Annual Review of Compensation ConsultantIndependence.The Committee annually reviews the independence of its compensation consultant, consistent with SEC and NYSE rules. Restrictive Covenants.Our share ownership requirementsELG members are robust: 6x base salary for the CEO; 3x base salary for other members of the ELG (including our other NEOs);subject to multiple restrictive covenants upon separation, including non-compete, non-solicitation and 5x the base annual cash retainer for non-employee directors.non-disclosure obligations.
No Pledging of Shares. Our directors and executive officers are not permitted to pledge UTC shares as collateral for loans or for any other purpose.
| | No Hedging.UTC does not allow directors andor executive officers to enter into short sales of UTC Common Stock or similar transactions where potential gains are linked to a decline in the price of our shares.
No
Repricing.Stock option and SAR exercise prices are set at the grant date market price and may not be reduced or replaced with stock options or SARs with a lower exercise price without shareowner approval (except to adjust for stock splits or similar transactions).
Use of Double Triggers. Change-in-control severance arrangements, for which only pre-2009 ELG appointees are eligible, as well as the accelerated vesting terms under the UTC Long-Term Incentive Plan, both have a double trigger. This means that a change-in-control will not automatically entitle an executive to severance benefits or equity acceleration; the executive must also lose his or her job or suffer a significant adverse change to employment terms and conditions.
Annual Review of Compensation Consultant Independence. On an annual basis, the Committee reviews the independence of its compensation consultant, as required by SEC and NYSE rules.
|
Proxy Statement Pledging of Shares.Our directors and Notice of 2016 Annual Meeting of Shareowners | 31 |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
No
Cash Buyouts of Underwater Stock Options orSARs.UTC does not allow buyouts of underwater stock options or SARs under any circumstance. Award recipientsExecutives may not sell, assign or transfer their interest in any long-term incentive award (including underwater stock options andor SARs) to a third party in exchange for cash or other consideration.
Market-Competitive Retirement Programs. We eliminated defined benefit pensions for executives hired on or after January 1, 2010. Also, for executives hired before that date, we discontinued the use of a traditional final average earnings pension formula on December 31, 2014 and replaced it with a cash balance formula.
No Perquisite Allowances. Cash perquisite allowances have been eliminated for all ELG members.
No Employment Contracts.The Committee does not believe fixed-term executive employment contracts that guarantee minimum levels of compensation over multiple years enhance shareowner value. Accordingly, none of our U.S. executives do not have employment contracts. Non-U.S. executives may have contracts except in instances where it is required by practiceconsistent with local regulations or regulation outsidepractices.
|
Notice of the U.S.
Restrictive Covenants. Our ELG members are subject to various restrictive covenants upon separation from UTC, including non-compete, non-solicitation2017 Annual Meeting of Shareowners and non-disclosure obligations.
Proxy Statement | 33 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis | What We Do | Elimination Use of Supplemental ELG Life Insurance.ELG members appointed onDouble Triggers.We have a double trigger for the accelerated vesting provisions under the UTC Long-Term Incentive Plan and the legacy Senior Executive Severance Plan, for which Mr. Hayes is the only NEO eligible. This means that a change-in-control will not automatically entitle an executive to severance benefits or after January 31, 2015 no longer receive an ELG life insurance benefit.equity acceleration; instead, the executive must also lose his or her job, or suffer a significant adverse change to employment terms and conditions.
Limitations on Personal Use of Aircraft. In 2015, UTC adopted an aircraft policy that limitsWe limit the CEO’s personal use of the Corporate aircraft to 50 hours annually. No other employees may use the CompanyCorporate aircraft for personal reasons.
Elimination of Cash Severance. We eliminated the 2.5x base salary ELG cash severance arrangement for ELG members appointed on or after May 2013. Instead, ELG RSU awards will vest for these ELG members upon mutually agreeable separation with three years of ELG service, regardless of age at separation.
| |
Review of Compensation Peer Group. Our CPG is reviewed periodically byThe Committee frequently reviews the Committeecomposition of our peer group and adjusted,makes adjustments, when necessary, to maintain a relevant and appropriate group for comparison withof peers to benchmark our executive compensation program.
Review of Committee Charter.The Committee reviews its charter regularlyannually to maintain strongeffective oversight and governance practices. |
32 | |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
How We Make Compensation Decisions OUR EXECUTIVE COMPENSATION PHILOSOPHY The Committee believes that executive compensation opportunities must align with and enhance long-term shareowner value. This core philosophy is embedded in all aspects of our executive compensation program and is reflected in an important set of guiding principles. We believe that the application of these principles enables us to create a meaningful link between the compensation paid to our executives and long-term, sustainable growth for our shareowners and compensation outcomes.shareowners. | GUIDING PRINCIPLES | | | | | | | | | | | RESPONSIBILITY  |  | | COMPETITIVENESS |   | Compensation should take into account each executive’s responsibility to act in accordance with our ethical, environmental, health and safety objectives at all times. Financial, strategic and operatingoperational performance must not compromise these values. A complete commitment to ethical and corporate responsibility is a fundamental principle incorporated into all aspects of our compensation program. | | Total compensation should be sufficiently competitive to attract, retain and motivate a leadership team capable of maximizing UTC’s performance. Each element should be benchmarked relative to peers. | | | |
| PAY-FOR-PERFORMANCE | | | BALANCE | | | A substantial portion of compensation should be variable, contingent on and directly linked to individual, Company and business unit performance. | | The portion of total compensation contingent on performance should increase with an executive’s level of responsibility. Annual and long-term incentive compensation opportunities should reward the appropriate balance of short- and long-term financial, strategic and operational business results. | | | |
LONG-TERM FOCUS  | | | SHAREOWNER ALIGNMENT  | | | For our most senior executives, long-term, stock-based compensation opportunities should significantly outweigh short-term, cash-based opportunities. Annual objectives should complement sustainable, long-term performance. | | The financial interests of executives should be aligned with the long-term interests of our shareowners through stock-based compensation and performance metrics that correlate with long-term shareowner value. |
| 34 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis ROLE OF THE COMMITTEE ON COMPENSATION AND EXECUTIVE DEVELOPMENT The Committee, which currently consists of seven independent directors, is responsible for overseeing the development and administration of our executive compensation program. Responsibilities.The Committee makes all compensation decisions concerning our CEO and the other ELG members, of our Executive Leadership Group (“ELG”), subject to the review byof the other independent directors. The ELG is made up of approximately 25 to 30 of our most senior executives, including the Named Executive Officers (“NEOs”)NEOs listed in the Summary Compensation Table on page 5760 of this Proxy Statement. The Committee’s other responsibilities include: | à• | Reviewing executive compensation plans and programs; | | | | | | à• | Considering input from UTC’s shareowners regarding executive compensation decisions and policies; | | | | | | à• | Reviewing and approving incentive plan targets and objectives; |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 33 |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
| | à | | • | Assessing the Company and each ELG member’s performance relative to these targets and objectives; | | | | | | à• | Evaluating the competitiveness of each ELG member’s total compensation package; and | | | | | | à• | Approving changes to compensation elementschanges for ELG members, including base salary, and annual bonus and long-term incentive opportunities and awards. |
The Executive Vice President & Chief Human Resources Officer, along with UTC’s Human Resources staff and an independent compensation consultant, assist the Committee with these tasks. The Committee’s charter, which sets out the Committee’s full responsibilities, can be found on our website at:
athttp://www.utc.com/Our-Company/Who-we-Are/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx.default.aspx. Performance Evaluation Process.The Committee has established a process for evaluating the performance of the Company, the President and CEO and the other ELG members.members of the ELG. At its first meeting everyeach year, the Committee reviews and approves financial, strategic and operational objectives both for the upcoming year. Following the end of the year, and for a longer-term period. At this meeting, the Committee also evaluates the CEO’s and other ELG members’ performance for the previous year. The Committee uses a combination of qualitative and quantitative factors to conduct a broad and balanced assessment of performance relative to both internal and external measures.these objectives, which it then uses as the basis for compensation decisions.
ROLE OF THE CEO Our CEO has no role in the Committee’s determination of his compensation. For the otherELG members, of the ELG, including the NEOs, the CEO presents the Committee with recommendations for each principal element of compensation. He bases theseThese recommendations are based upon his assessment of each individual’sexecutive’s performance, the performance of each executive’stheir applicable business unit and/or function, benchmark information and retention risk. The Committee reviews the CEO’s recommendations and makes appropriate adjustments and approves compensation changes at its discretion,as it deems appropriate. Its decisions are subject to the review byof the other independent directors. The CEO does not have any role in the Committee’s determination of his own compensation.
ROLE OF THE COMPENSATION CONSULTANT The Committee retained Pearl Meyer & Partners (“Pearl Meyer”) to serve as its executive compensation consultant for 2015. While2016. Pearl Meyer may make recommendations on the form and amount of compensation, but the Committee makes all decisions regarding the compensation of our NEOs and other ELG members. During 2015,2016, Pearl Meyer advised the Committee on a variety of subjects, including compensation plan design and trends, pay-for-performance analytics, benchmarking normsdata and other similarrelated matters. Pearl Meyer reports directly to the Committee, participates in meetings as requested and communicates with the Committee Chair between meetings as necessary. A Pearl Meyer representative attended four meetings in person in 2015.2016. | Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 35 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis Prior to engaging Pearl Meyer, the Committee reviewed the firm’s qualifications, as well as its independence and any potential conflicts of interest. Pearl Meyer does not perform other services for or receive other fees from UTC other(other than an incidental amounts (less than $9,000amount of $10,100 in 2015)2016 related to participation in certain business-related surveys.surveys). The Committee therefore made the determinationdetermined that Pearl Meyer qualified as an independent consultant.consultant in 2016. The Committee has the sole authority to modify or approve Pearl Meyer’s compensation, determine the nature and scope of its services, evaluate its performance, terminate the engagement, and hire a replacement or additional consultant at any time. The Committee also utilizes market data provided byfrom other compensation consulting firms, such as Willis Towers Watson and Aon Hewitt, for benchmarking and other purposes. ThisHowever, this benchmark data consists of information that is generally available to other Willis Towers Watson and Aon Hewitt clients. Neither firm made recommendations to the Committee or management on peer group composition or on the form, amount or design of executive compensation in 2015.2016. 34 | |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
OUR COMPENSATION PEER GROUP We compare our executive compensation program to programsthose at the 2624 companies that make up our Compensation Peer Group (“CPG”). The CPG’s composition reflects a mix of both industry and non-industry peers that the Committee believes thatviews as competitors for senior executive talent. Like UTC, 12 of these 24 companies provide a relevant comparison based on their similarity to UTC in size and complexity, takingare Dow Jones Industrial Average components. In determining the most appropriate peer group composition, the Committee takes into account factors such as revenue, market capitalization, global scope of operations, manufacturing footprint, research & development activities and diversified product portfolios. Like UTC, 11In its 2016 review, the Committee removed four companies (Danaher, FedEx, Hewlett-Packard and Siemens) and added Cisco Systems and General Motors Corporation to the peer group. The Committee believes these changes provide a more relevant comparison based on the similarity of these 26 companies are Dow Jones Industrial Average components.to UTC in size and operational complexity. The CPG is constructed to serve the specific purpose of benchmarking executive compensation. We do not use the relative financial performance of the CPG as a performance metric infor our incentive compensation awards. The CPG’s composition reflects a mix of both industry and non-industry peers that we view as realistic competitors for senior executive talent. We also use other Fortune 100 companies and data from a broader range of companies for insight on general compensation trends and to supplement CPG data when appropriate.
THE COMPENSATION PEER GROUP
INCLUDES THE FOLLOWING COMPANIES:
OUR COMPENSATION PEER GROUP AEROSPACEINCLUDES THE FOLLOWING COMPANIES:
| | Aerospace & | | | | | CONSUMERConsumer | DEFENSEDefense | | CHEMICALSChemicals | | PACKAGED GOODSPackaged Goods | Boeing | Northrop | | DuPont | | Johnson & Johnson | General | Grumman | | Dow | | Procter & Gamble | Dynamics | Raytheon | | | | | | | Boeing
General
Dynamics
Lockheed
Martin | | Northrop
Grumman
Raytheon | | DuPont
Dow Chemical | | Johnson & Johnson
Procter & Gamble | | | Diversified | | Equipment & | | | | Industrials | | Machinery | | Automotive | | | | | | | MartinGeneral
Electric | | Honeywell | | 3M
Caterpillar
Deere
Eaton | Emerson
Electric
Johnson
Controls | | General Motors | | | Oil & Gas | | Pharmaceuticals | | Technology/
Communications | | | | | | | | Chevron | | Pfizer | | AT&T
Cisco | IBM
Verizon
| | | | | | | | | | | | | | | | |
PEER GROUP DATA* | | | Net Sales
(in millions) | | | Market
Capitalization
(in millions) | | | Employees | | | 25thPercentile | | | $29,243 | | | | $49,539 | | | | 68,675 | | | 50thPercentile | | | $47,703 | | | | $80,373 | | | | 97,900 | | | 75thPercentile | | | $83,582 | | | | $202,228 | | | | 145,625 | | | UTC | | | $57,244 | | | | $90,262 | | | | 202,000 | | | UTC Rank | | | 62% | | | | 53% | | | | 87% | |
| | | DIVERSIFIED | | EQUIPMENT & | | | | INDUSTRIALS | | MACHINERY | | LOGISTICS | Danaher | Honeywell | | 3M | Emerson | | FedEx | General | Siemens | | Caterpillar | Electric | | | | Electric | | | Deere | Johnson | | | | | | | Eaton | Controls | | | | | | | | | | | | | | | | | | | | | | | | | | TECHNOLOGY/ | OIL & GAS | | PHARMACEUTICALS | | COMMUNICATIONS | Chevron | | Pfizer | | AT&T | IBM | | | | | | | HP | Verizon | | | | | | | | |
Companies inBluerepresent Dow Jones Industrial Average components.
PEER GROUP DATA(1)
| | | | | | Market | | | | | | | Revenue | | Capitalization | | | | | | | (in millions) | | (in millions) | | Employees | | | 25thPercentile | | | $26,996 | | | | $34,164 | | | | 71,112 | | | 50thPercentile | | | $38,581 | | | | $58,054 | | | | 107,850 | | | 75thPercentile | | | $59,463 | | | | $133,507 | | | | 155,800 | | | UTC | | | $56,450 | (2) | | | $80,540 | | | | 197,180 | | | UTC Rank | | | 74% | | | | 63% | | | | 83% | |
(1)* | Peer company data is provided by S&P Capital IQ. RevenueNet sales and employee data reflect the most recent publicly available information (as of February 19, 2016)17, 2017). In certain cases, S&P Capital IQ has made adjustments to revenue to reflect non-operating income or expense, equityNet sales are based on continuing operations, as reported, in earnings of unconsolidated subsidiaries, interest income, and non-recurring special items such as discontinued operations or gains on the sale of securities.accordance with U.S. GAAP financial reporting standards. Market capitalization for peer companies is calculated based on publicly available shares outstanding as of December 31, 2015. | | | (2) | UTC revenue is adjusted for discontinued operations, restructuring and other significant, defined non-operational items. For a reconciliation to U.S. GAAP see Appendix B on page 86.2016. |
Companies inBlue are Dow Jones Industrial Average components. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners36 | 35 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis HOW WE BENCHMARK OUR COMPENSATION To ensure that ourmaintain a sufficiently competitive executive compensation program, is sufficiently competitive, the Committee believes that the target value of each UTCprincipal element of compensation element(defined below) should generally be targeted to align withapproximate the market benchmarks. Therefore, UTC targets base salary, annual bonus and long-term incentive awards at the median of the CPG. We supplement Fortune 100 and general industry data for benchmarking purposes when CPG data is not sufficient or available. All compensation targets are aligned with the market median. |
median. The Committee annually evaluates each compensation element of our executive population’s compensation relative to the market. Individualmarket data for each ELG member’s role and makes adjustments as necessary. However, individual compensation variesmay vary from market median benchmarks based on the Committee’s assessment of Company, business unit/function and individual performance, job scope, retention risk, tenure and other factors that it determines areto be relevant to its evaluation. Target compensation approximates the market median The Committee also uses the CPG to benchmark the overall design and structure of our program. Data from a broader range of companies, including the Fortune 100, are utilized for insight into general compensation trends and to supplement CPG data when necessary and appropriate. Our Principal Elements of Compensation The following table summarizes the principal elements of our executive compensation program for 2015.2016. The Committee structures these elements to promote and reward superior financial performance through a variety of performance metrics and time horizons. | | | Elements(1) | | Time Horizon (in years) | | Performance Metrics | | Purpose | | | | Base Salary | | n | | None | | Attract and retain |  | Annual Bonus | | nAnnual Bonus | | n | | Earnings(1)(2) | | | | | | | | Free cash flow to net income ratio(2) | | Drive near-term performance goals | | | | | | Free cash flow to net income ratio | Individual achievement | | | | Performance Share Units | | nnn | | Adjusted earnings per share(1)(2) | | | | | | | | Individual achievement | | | Performance Share UnitsReturn on invested capital(2) | | nnn | | Earnings per share(1) | | Drive medium-term performance goals | | | | | | | Total Shareowner Returnshareowner return vs. S&P 500 | | | | Stock Appreciation Rights | | nnnnnnnnnn | | Share price appreciation | | Drive long-term performance goals |
| | | (1) | Financial performance measures are subject to adjustments by the CommitteeBeginning in certain circumstances. 2017, RSUs comprise 20% of ELG members’ total annual LTI awards, as discussed in more detail on page 42. | | | | (2) | Refer to Appendix B on page 5589 for more details on how these metrics are calculated. |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 37 |
(2) | Beginning in 2016, PSUs will include a return on invested capital (“ROIC”) metric, as discussed in more detail on page iv. |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis EMPHASIS ON “AT RISK” COMPENSATION “AtThe vast majority of compensation for our CEO and other NEOs is “at risk” compensation–compensation, meaning pay thatit is directly contingent on performance–made up 87%performance. At risk compensation consists of our CEO’s and 88% of our other NEOs’ compensation for 2015 (based on the base salary, annual bonus and long-term incentives disclosed in the Summary Compensation Table on page 57). Annual bonus and long-term incentive awards that are subject to the achievement of pre-established performance targets and link to shareowner value.goals or stock performance. Although base salary and other fixed elements of compensation are essential to any executive compensation program and necessary for the recruitment and retention of top talent, we believe that “at risk”the Committee believes at risk compensation for our most senior executives should significantly outweigh their base salaries. The Committee’s 2015 compensation decisions reflect this philosophy.
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EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
The following charts show the basic pay mix for our CEO and the other NEOs for 2015 and illustrateis shown in the significant portion of compensation that is “at risk.”
PAY MIX
 charts below, reflecting the amounts reported in the Summary Compensation Table on page 60.
| CEO* | Other NEOs* | | |  |  |
| | | * | Charts reflect the value for theof base salary andsalaries, annual bonus and long-term incentive awards, as shown in the Summary Compensation Table on page 57.60. The Other NEOs chart excludes Mr. Bellemare who retired effective January 31, 2015.the CEO. |
BASE SALARY To help UTC attract and retain talented and qualified executives, we provide competitive base salaries, targetedwhich we target at either the CPG median or a blend of the CPG and Fortune 100 medians, as appropriate.market median. Base salary constitutes a significant portion of our NEOs’ fixed compensation (which also includes pensionretirement and other benefits such as health, life and disability insurance)benefits). Each year, the Committee reviews the CEO’s recommendations from the CEO regardingfor base salary adjustments for ELG members.members relative to market data of peers in similar roles at other companies. The Committee has complete discretion to modify or approve thesethe CEO’s recommendations. The CEO has no input into, and does not participate in, the Committee’s determination of his own base salary. Actual salaries will vary from the CPG and market mediansmedian based on factors such as job scope and responsibilities, experience, tenure, individual performance, retention risk and internal pay equity. | 38 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis ANNUAL BONUS OverviewOur Objectives
The Committee believes its methodology for determining annual bonus awards accomplishes the following objectives: | • | Sets financial performance goals that are consistent with the Committee’s assessment of the opportunities and risks for the upcoming year, as communicated to our investors; | | | | • | Establishes challenging but achievable performance goals for our executives; | | | | • | Provides incentive opportunities that are market competitive; and | | | | • | Allows the Committee to make discretionary adjustments if it determines that actual performance does not fully align with measured performance. |
Our Process Our NEOs’ 20152016 annual bonus awards were determined through the following process:   | |   | |   | |   | | | | | | | | | | | Target Annual Bonus is basedBased on market benchmarks and expressed as a % of base salary:
CEO 165% EVP & CFO 100% Business Unit Presidents 100% | | UTC and Business Unit Financial Performance Factor:Factors: | | Individual Performance Factor: | | Award Delivery: | on market benchmarks: | | • Earnings* vs. pre-established targets(weighted at 60%);targets; plus • Free Cash Flow*cash flow as a percentage% of Net Income(weighted at 40%)net income*; and • Discretionary adjustments by the Committee. | | Individual Performance Factor: Discretionary adjustments based on individual performance relative to 2015financial, strategic financial and operational goals. | | Awards for 2015Award Approval and Delivery: Following the end of the performance period, awards are approved by the Committee at its first meeting of the year and subsequently delivered into executives during the first quarter of 2016. These amounts are displayed under the “Bonus” column in the Summary Compensation Table. | President and CEO | 165 | % | | President & CEO, UTC BIS | 110 | % | | EVP & CFO | 100 | % | | President, Pratt & Whitney | 95 | % | | EVP & General Counsel | 85 | % | quarter. |
| * | EarningsUnder the UTC Annual Executive Incentive Compensation Plan, earnings and the ratio of free cash flow to net income underused to calculate the UTC Annual Executive Incentive Compensation Planfinancial performance factors are determined separately for UTC and oureach business units, as detailedunit, and are defined in Appendix B on page 38.89. |
How We Set Annual Bonus Target Levels The Committee approves annual bonus target levels for ELG members based on market data relevant to each individual’s role. Target levels are expressed as a percentage of base salary and generally approximate the market median. Actual awards are based on the achievement of financial and individual performance goals, as assessed by the Committee. 2016 Changes.During its annual review, the Committee increased the target annual bonus percentage from 95% to 100% of base salary for the business unit presidents to better align their bonus opportunities with the market. Proxy Statement and Notice of 20162017 Annual Meeting of Shareowners and Proxy Statement | 3739 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis How We Determine Target Annual Bonus LevelsFinancial Performance Metrics
The Committee approvesestablishes annual performance goals for two financial metrics: earnings and the ratio of free cash flow to net income (“FCF / NI”). Threshold, target annual bonus leveland maximum goal levels are set for each position held by ELG members. These target levels are expressed as a percentage of base salary and vary among executives based on specific roles and responsibilities within the organization. While target award levels generally reflect values that approximate the CPG and Fortune 100 medians, actual award payouts are based on financial and individual performance factors, as assessed by the Committee. As part of its annual review of executive compensation, the Committee determines if any adjustments to annual bonus target percentages are appropriate.
How We Determine Financial Performance Factors
To determine the financial performance factors for the Company and each of its business units, the Committee measures performance annually relative to two pre-established financial metrics:
• | Earnings. For the Company, the earnings goal is an adjusted net income goal that the Committee sets to align with the performance expectations the Company communicates externally to investors for the year. For our business units, the earnings goal is defined as growth in adjusted earnings before interest and taxes and is based on each business unit’s anticipated opportunities and challenges for the upcoming year. For a definition of how we calculate earnings for UTC and our business units, refer to page 55. | | | • | Free Cash Flow to Net Income (“FCF / NI”) Ratio. For the Company, this ratio is set to generally align with the performance expectations communicated to investors for the year. A target FCF / NI ratio is also established for each business unit based on its strategic business plan for the year and contributes to the overall goal set for the Company. The Committee believes that cash flow performance is a relevant measure of the overall quality and sustainability of earnings. For the definition of how we calculate the ratio of FCF / NI for both UTC and our business units, refer to page 55 of this Proxy Statement. |
metric. Performance relative to these targetspre-established goals determines the financial performance factors for UTC and each business unit. The Committee reviews these financial performance factors and may, if appropriate, makesmake adjustments to thesethe calculated factorsresults (see “Use“Committee’s Use of Committee’s Discretion in Annual Bonus Awards” on page 39)42). Each executive’s target annual bonus value (base salary x target bonus percentage) is multiplied by his or her applicable financial performance factor. Aggregated, these amounts generate separate award pools for UTC and each business unit that are then allocated among eligible executives based on individual performance. See page 39 for details on the individual performance factor.
Metric Weighting.The metrics and weightings used to determinecalculate the UTC and business unit financial performance factors are shown in the charts below. The UTC financial performance factor determines the annual bonus pool for 2015Corporate Office executives, while a blend of the UTC and business unit financial performance factors are as follows: 
(1)UTC* | Refer to page 55 to see how we calculate earnings and the ratio of FCF / NI for UTC and business unit executives.Business Units* | | | | (2) | The 40% consists of UTC Earnings weighted at 24% |
| | | * | Refer to Appendix B on page 89 for a definition on how we calculate earnings and UTC FCF / NI weighted at 16%.for the purposes of determining the UTC and business units’ financial performance factors. |
Payout Ranges.There are no payouts for below threshold-level performance. Payouts begin at 50% of target for threshold-level performance and are capped at 200% for maximum-level performance. In 2016, however, the Committee set the maximum payout level for the UTC FCF / NI metric at 150% of target. Earnings Goals for 2016 UTC Earnings.The UTC earnings metric is an adjusted net income goal set by the Committee to align with the performance expectations communicated to investors for the year. Net income includes the impact of items such as tax, interest and foreign exchange fluctuations, which are managed at the Corporate level and relevant to the assessment of UTC performance. The Committee therefore believes that adjusted net income is an appropriate metric for determining the UTC financial performance factor. For 2016, the Committee set a $5.35 billion adjusted net income goal for the Corporation, an amount which corresponds to adjusted EPS of $6.48 and within the range communicated to investors in December 2015. Business Unit Earnings.The Committee believes operating earnings growth, exclusive of tax, interest and foreign exchange exposure, should be the focus of business unit performance. For this reason, the Committee uses growth in adjusted earnings before interest and taxes (“EBIT”) at constant currency for the business units. For 2016, the Committee approved individual EBIT goals for each business unit ranging from -3% to 6%, with each goal reflecting the anticipated opportunities and challenges for the upcoming year. 2016 Earnings Results and Factors.The Company reported 2016 net income from continuing operations attributable to common shareowners of $5.07 billion. Net income was then adjusted for restructuring, non-recurring and other significant non-operational items. The Committee made these adjustments to maintain the validity of the goal as originally formulated. Following these adjustments, net income of $5.46 billion was used to determine the UTC financial 3840 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis The Committee believes this methodology for arriving at the financial performance factors accomplishes the following objectives:
• | Aligns incentives with our annual strategic business plan; | | | • | Establishes challenging but achievable bonus targets for our executives; and | | | • | Sets targets that are consistent with the Committee’s assessment of opportunities and risks for the upcoming year, as communicated to our investors. |
How We Determined the Financial Performance Factors for 2015
• | Earnings. The 2015 expected EPS range we communicated to investors in January 2015 was $6.85 to $7.05, which resulted in the Committee setting a $6.282 billion net income target for the 2015 annual bonus awards, an amount which corresponded to EPS of $7.00. The Committee also approved specific earnings growth goals for each business unit ranging from -10% to +10%, which reflected the Committee’s assessment of each business unit’s external market conditions and the specific challenges and opportunities anticipated for 2015. | | | • | Free Cash Flow to Net Income Ratio. For 2015, the Committee approved a FCF / NI goal of 100% for the Company and each of the business units. |
2015 Results.The Company reported 2015 net income attributable to common shareowners of $7.608 billion. Because this amount included a gain realized from the sale of Sikorsky Aircraft and that gain would have substantially increased annual bonus payouts, the Committee decided to measure net income based on continuing operations, which excluded Sikorsky Aircraft. The Committee also adjusted for the impact of restructuring, non-recurring and other significant, defined non-operational items. After these adjustments, which the Committee believed were necessary to preserve the integrity of the original bonus targets, adjusted net income of $5.563 billion was utilized to determine the annual bonus financial performance factor, for the Company. This net income result generatedresulting in a 0%127% payout factor for the UTC earnings portion of the annual bonus award. The vesting of the earnings portion of the awardaward. Business unit earnings resulted in payout factors ranging from 50% to 98% of target. In 2016, the net tax, interest and foreign exchange impacts were more favorable than the plan used to set the UTC earnings goal, resulting in a positive impact on the UTC financial performance factor.
| UTC Earnings Goal* (adjusted net income) | | Threshold | | Target | | Maximum | | Actual | | Performance level | | $4.82 billion | | $5.35 billion | | $5.75 billion | | $5.46 billion | | Payout factor (as a % of target) | | 50% | | 100% | | 200% | | 127% |
FCF / NI Goals for our2016 UTC FCF / NI.The UTC FCF / NI goal is also set to generally align with the performance expectations communicated to investors for the year. The Committee uses this metric because it believes that cash flow performance is a relevant measure of the overall quality and sustainability of earnings. For 2016, the Committee approved a UTC FCF / NI goal of 90%. Business Unit FCF / NI.FCF / NI goals are also established for each business unitsunit based on its strategic business plan for the year. The overall goal set for UTC incorporates the goals for each of the business units. For 2016, business unit FCF / NI goals ranged from 0%90% to 112%105%. Refer to Appendix B on page 86 for a detailed reconciliation of this adjusted net income measure to U.S. GAAP. 20152016 FCF / NI Results and Factors.UTC’s 2016 free cash flow from continuing operations was 126%93% of net income. AdjustmentsFor purposes of determining financial performance factors for annual bonus purposesthe Company and each of the business units, the calculated results were madeadjusted for the impact of certain restructuring, and non-operational gains and a non-recurring chargecharges, and other significant items unrelated to operational performance. Following these adjustments, 99% was used to calculate the UTC financial performance that predated the performance measurement period. This resultedfactor, resulting in a 99%108% payout factor for the FCF / NI ratio vesting factor forportion of the Company. Theaward. Calculated business unit payout factors related to FCF / NI ratio for our business units ranged from 69%42% to 106%129% for the year.
| UTC FCF / NI Goal* | | Threshold | | Target | | Maximum | | Actual | | Performance level | | 50% | | 90% | | 150% | | 99% | | Payout factor (as a % of target) | | 50% | | 100% | | 150% | | 108% |
In combination, the Company generated an overall
Overall Financial Performance Factors for 2016.The weighted earnings and FCF / NI payout factors resulted in a blended UTC financial performance factor of 39%120% of target. The blendedAfter incorporating the UTC factor, the combined financial performance factors for our business units ranged from 34%76% to 73%110% of target. Pool Determination.Pools are calculated by multiplying each executive’s annual bonus target value (base salary x target bonus percentage) by the applicable financial performance factor. These amounts are aggregated to determine award pools for the Corporate Office and each business unit and are subsequently allocated among eligible executives based on individual performance. Individual Performance FactorFactors Our NEOs also begin the year with individual financial, strategic and operational and/or financial objectives. Based on ourthe CEO’s assessment of theeach NEO’s performance, of each NEO, he may recommend that the Committee make a discretionary adjustment to increase or decrease the annual bonus determined bycalculated using the NEO’s relevant financial performance factor. The Committee considers these recommendations and makes adjustments as it deems appropriate. Mr. Hayes playshas no role in the Committee’s determination of his own annual bonus. | * | Refer to Appendix B on page 89 for a definition on how we calculate earnings and FCF / NI for the purposes of determining the UTC and business units’ financial performance factors. |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 41 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis Committee’s Use of Committee’s Discretion in Annual Bonus Awards The Committee sets annual bonus targetsprogram is designed to closely align individual payouts with the objective of offering payout opportunities that align with Company, business unit and individualactual performance. TheHowever, the Committee retains the authority to make upward or downward adjustments if it determines that Company, business unit, and/or individual performance relative to pre-established targets doesresults do not accurately reflect the overall quality of performance for the year. While the achievement of financial metricsperformance goals remain the primary basis for determining actual annual bonus amounts, the Committee has made positive and negative discretionary adjustments in the past to both financial performance factors and individual performance factors. Examples of situations that could result in a positive or negativediscretionary adjustment include: Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 39 |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
| • | Material, unforeseen circumstances beyond management’s control that have a positive or negative effect onaffected financial performance results relative to the established targets orgoals, including certain non-recurring charges or credits unrelated to measuredoperating performance; | | | | | • | Tax or accounting rule adjustments whichthat positively or negatively impact performance; | | | | | • | Changes to the Company’s capital structure; | | | | | • | An executive’s performance relative to specific individual annual objectives; or | | | | | • | An executive’s failure to adhere to UTC’s Code of Ethics, Enterprise Risk Management program or other Company policies. |
LONG-TERM INCENTIVE AWARDS Types of Incentives Used OurIn 2016, our NEOs receivewere granted two types of annual equity-based long-term incentive awards:(“LTI”) vehicles under our annual program: Performance Share Units (“PSUs”) and Stock Appreciation Rights (“SARs”). PSUs made up slightly more than halfcomprised approximately 50% of ELG members’ 2015 annual long-term incentive2016 LTI awards, with the remaining portion granted in the form of SARs. The number of PSUs and SARs awarded to each NEO is based on a total award value approved by the Committee. These awards are subject to a three-year vesting period and other terms and conditions as set forth in the award statements and as provided under the terms of the UTC Long-Term Incentive Plan (“LTIP”).Plan.
The Committee may also, from time to time, may approve special equity grants for purposes such as recruitment, retention, recognition or to drive the achievement of specific strategic performance goals. These special grants may be in the form of SARs, PSUs, RSUs, restricted stock restricted stock units (“RSUs”) or performance-based SARs. In 2015, special sign-on2016, upon his appointment to the ELG, Mr. Leduc was granted an ELG RSU and SAR awards were granted to Mr. Johri as an offset to compensation forfeited upon leaving his former employer. Mr. Adams also receivedretention award. Under the ELG severance program (see page 47 for details), this award replaces a special RSU award in recognition of achieving 2015 FAA and EASA certification of the GTF engine.prior cash severance arrangement. Changes for 2017.On an annual basis, the Committee reviews the design of our long-term incentive awards to ensure it meets our program’s fundamental objectives of aligning the interests of executives and shareowners, while attracting and retaining talented senior leadership. As discussed on page v, the Committee determined that adding time-based RSUs that vest after three years to our LTI program would result in a more balanced and market-competitive approach to LTI design. Beginning in 2017, our NEOs received 20% of their total annual LTI grant value in the form of RSUs, 30% in the form of SARs and the remaining 50% in PSUs. | 42 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis Performance Share Units PSUs vest at the end of a three-year performance measurement period if, and to the extent, the Company has metachieves performance goals pre-establishedestablished by the Committee. Each vested PSU converts into one share of Common Stock. Unvested PSUs do not earn dividend equivalents. Metrics
2015 PSU awards used two equally weighted metrics: earnings per share (“EPS”) growth and relative total shareowner return (“TSR”) versus the S&P 500 (see page 55 for details on how we calculate these metrics). For each metric vesting is calculated separately.
Beginning in 2016, our PSU awards also incorporate a return on invested capital (“ROIC”) metric. The ROIC metric is weighted at 35%, while the EPS growth metric and the relative TSR metric are now weighted at 35% and 30%, respectively.
Setting Performance Goals
EPS Growth. The Committee approved a three-year EPS compound annual growth rate target of 6% for the 2015 PSU grant. This challenging but attainable goal aligns with the expectations we communicated to shareowners in December 2014, prior to the beginning of the performance period. When setting EPS targets for our PSU awards, the Committee accounts for various long-term, business-related expectations, including planned share buybacks, macroeconomic market trends, pension headwinds, cost reduction plans, etc. The Committee retains discretion to exclude certain items (e.g., unplanned share buybacks, restructuring, non-recurring, non-operational items, etc.) from the EPS growth calculation, as necessary to preserve the integrity of the original performance target.
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EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
Relative Total Shareowner Return. For the 2015 PSU grant, consistent with past practice, the Committee set a cumulative three-year TSR target at the 50thpercentile relative to the S&P 500 for the remaining 50% of the award.
The Committee believes that comparing UTC’s TSR to companies within the S&P 500 provides an appropriate benchmark for measuring our share price performance as a large capitalization company. The Committee does not set TSR goals relative to the performance of our CPG, which is constituted for the specific purpose of measuring the competitiveness of our compensation program. The S&P 500 provides a more comprehensive and relevant comparison for our share price performance and, unlike the CPG, is not a self-selected, customized benchmark.
Our PSUs are designed to deliver market median compensation at target levels of EPS growth and relative TSR performance. As a result, below-target performance levels will generate below-market median payouts and above-target performance levels will generate above-market median payouts.
2016 Performance Metrics and Targets.PSUs granted in 2016 include three performance metrics: earnings per share (“EPS”) growth; total shareowner return (“TSR”) relative to the S&P 500; and return on invested capital (“ROIC”). The following charts show the percentageEPS growth and ROIC metrics are each weighted at 35% and relative TSR is weighted at 30% of the 2015 PSUs that will vest based on the levels of performance achievedtotal award. Vesting is calculated separately for each metric:metric. The Committee approved the following goals for the 2016 PSU awards: EPS GROWTH (WEIGHTED 50%) | • | TSR VS. S&P 500 (WEIGHTED 50%)*EPS Growth:The Committee approved a three-year EPS compound annual growth rate target of 4.5%. This goal aligns with our mid-range strategic business plan and reflects what the Committee believes is a challenging yet attainable target. | | | | |  | |  | | | | EPS Growth Achieved (%) | | Relative Total Shareowner Return:Consistent with past practice, the Committee set a cumulative three-year TSR Rank Achieved (Percentile) |
* | target at the 50thpercentile relative to the S&P 500. Vesting does not occur if UTC’s performance ranks below the 25thpercentile. Vesting is capped at 200% of target if performance reaches the 75thpercentile. In the event of negativethe Company’s TSR over the three yearthree-year performance period is negative, the payout for the TSR portion of the award will be capped at 100% of target, regardless of UTC’s performance relative to the S&P 500. The Committee believes this cap reinforces the alignment of executive and shareowner interests. | | | | Comparing UTC’s TSR to the companies within the S&P 500 provides an appropriate benchmark for measuring our share price performance as a large capitalization company. The Committee does not set TSR goals relative to the performance of our CPG, as it is composed for the specific purpose of measuring the competitiveness of our executive compensation program. The Committee believes the S&P 500 provides a more comprehensive and relevant comparison for our share price performance and, unlike the CPG, is not a self-selected, customized benchmark. | | | | • | Return on Invested Capital:The Committee approved a three-year ROIC target of 10.5%, an amount that exceeds our weighted average cost of capital, and incentivizes our executives to make disciplined capital allocation decisions. ROIC is calculated based on quarterly averages over the three-year performance period. |
PSU VestingThe following charts show the percentage of the 2016 PSUs that will vest based on the levels of performance achieved for each metric:
| EPS Growth (weighted 35%) | | TSR vs. S&P 500 (weighted 30%) | | ROIC (weighted 35%) | | | | | |  | |  | |  |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 43 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis The 2015Committee measures performance based on continuing operations. When setting targets for our PSU awards, the Committee accounts for various long-term business factors, including planned share buybacks, macroeconomic market trends, pension headwinds/tailwinds and cost reduction plans. Certain items such as unplanned share buybacks, restructuring charges, and other non-recurring and non-operational items may be excluded from performance results, as necessary, to maintain the validity of the targets as originally formulated. See Appendix B on page 89 for a definition of how we calculate these metrics. PSU Vesting (2014–2016 Performance Period).PSU awards granted on January 2, 2014 were subject to vesting based on UTC’s performance relative to goals set for the EPS resultsgrowth and TSR metrics. 2016 GAAP EPS of $8.61 per share included discontinued operations and the gain realized from the sale of Sikorsky Aircraft. The Committee excluded discontinued operations from EPS, which includes this gain,$6.13 was adjusted to $6.61 for PSU vesting measurement purposes. This resulted in an EPS from continuing operationspurposes to account for the impact of $4.53. The Committee made additional adjustments to exclude restructuring, non-recurring, and other significant defined items unrelated to operational performance (see Appendix BA on page 86pages 87-88 for details), resulting. This resulted in an adjusteda 5% compound annual EPS of $6.30 and a vesting factor of 88%. UTC’s cumulative TSR relative togrowth rate over the S&P 500 for thethree-year performance period, between 2013 and 2015 waswhich fell below the threshold performance level and resulted in a 0% vesting factor.
The Committee believes the final PSU vestingpayout factor of 44%0%. UTC’s three-year cumulative TSR relative to the S&P 500 also fell below the threshold performance level, resulting in a payout factor of target, which is based on an 88% EPS and a 0% relative TSR vesting result, fairly aligns with. Despite solid 2016 financial performance, the overallthree-year combined results failed to reach threshold performance for the vesting of the Company during the 2013-2015 performance period.2014 PSU awards.
Stock Appreciation Rights SARs entitle the award recipient to receive, at the time of exercise, shares of UTC Common Stock with a market value equal to the difference between the exercise price (the closingmarket price of Common Stock on the date of grant) and the market price ofUTC Common Stock on the date the SARs are exercised.exercised and the pre-established exercise price for the SAR (i.e., the closing price of UTC Common Stock on the date of grant). SARs vest and become exercisable after three years and expire ten years from the date of grant.grant date. If the employment of thean executive terminates prior tobefore the vesting date, the award is forfeited, except in cases of death, disability, qualifying retirement or qualifying separation following a change-in-control. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 41 |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
SAR awards directly link NEO compensation to share price appreciation, aligning shareowner and executive interests with long-term value creation. The Committee believes the ten-year term of these awards has been a driving force behind UTC’s 115% ten-year cumulative TSR of 121% for the period ending on December 31, 2015, which2016, a result that exceeded the performance of the Dow Jones Industrial Average at 111%(106%) and the S&P 500 at 102%Index (96%). | 44 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis Other Compensation Elements RETIREMENT AND DEFERRED COMPENSATION BENEFITS Retirement and deferred compensation plans help UTC attract and retain talented executives. Over the years, the Committee has modified these programs to maintain a competitive position within an evolving market. We believe the overall design of our retirement and deferred compensation programs is consistent with the current marketplace and approximateapproximates the CPG median. The Pension Benefits table on page 6366 and the Nonqualified Deferred Compensation table on page 6568 detail the retirement benefits and deferred compensation amounts providedarrangements in which our NEOs are eligible to our NEOs.participate. Plan*PLAN | | DescriptionDESCRIPTION | | UTC Employee Retirement Plan | | EmployeesOnly employees hired prior to January 1, 2010 are eligible to participate in this tax-qualified pension plan. Effective December 31, 2014, participating employeesparticipants who werehad been covered by the original final average earnings (“FAE”) formula of this plan transitioned to a cash balance formula. As a result, theThe cash balance formula, which hadwas already been in effect for newer plan participants, now applies to all participants who were previously covered by the FAE.richer FAE formula. | | UTC Pension Preservation Plan | | An unfunded, non-qualified retirement plan utilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. ItFor employees hired prior to January 1, 2010, it provides pension benefits not provided under the tax-qualified pension plan because of Internal Revenue Code limits. | | UTC 401(k) Savings Plan | | A tax-qualified plan where employees receive an employer stocka matching contribution in the form of UTC stock units with a value equal to 60% of the first 6% of pay (base salary plus annual bonus) contributed by the employee. Salaried employees hired on or after January 1, 2010 who are not eligible to participate in the UTC Employee Retirement Plan and instead receive an additional age-based Company automatic contribution (ranging from 3% to 5.5% of earnings) to their UTC 401(k) Savings Plan.Plan account. | | UTC Savings Restoration Plan | | An unfunded, non-qualified plan that matches the executive’s contributions with Company contributions in UTC stock units at the same rate as the UTC 401(k) Savings Plan, to the extent such contributions exceed Internal Revenue Code limits. | UTC Company Automatic
Contribution Excess Plan | | An unfunded, non-qualified plan for which salaried employees hired on or after January 1, 2010 may receive an additional age-based Company automatic contribution (ranging from 3% to 5.5% of earnings) for amounts above the Internal Revenue Code limits applicable to the qualified UTC 401(k) Savings Plan. Participants receiving benefits under this plan are ineligible to accrue a benefit under the UTC Pension Preservation Plan described above. | UTC Savings Restoration Plan | | An unfunded, non-qualified plan that credits employee contributions with Company matching contributions in UTC stock units at the same rate as the UTC 401(k) Savings Plan, to the extent such contributions exceed Internal Revenue Code limits. | | UTC Deferred Compensation Plan | | An unfunded, non-qualified, deferred compensation arrangementplan that offers participantsexecutives the opportunity to defer up to 50% of base salary and up to 70% of annual bonus. | | UTC PSU Deferral Plan | | An unfunded, non-qualified, deferred compensation plan that allows executives to defer between 10% and 100% of their vested PSU award.awards. Upon vesting, the deferred portion of theeach PSU award is converted into deferred stock units that accrue dividend equivalents. |
*Detailed descriptions of each of these plans and the benefits they provide can be found on pages 64 to 66.
42Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis PERQUISITES AND OTHER BENEFITS We provide the following insurance coverage and other benefits to our senior executives which the Committee believes are consistent with market practice and contribute to recruitment and retention. Perquisite/BenefitsPERQUISITES/BENEFITS* | | DescriptionDESCRIPTION | | ELG Life Insurance | | ELG members appointed prior to January 31, 2015 may receive Company-funded life insurance coverage up to three times their base salary at age 62 (projected or actual). This benefit is not available to ELG members appointed after January 31, 2015.2015, including Mr. Leduc. | | ELG Long-Term Disability | | The ELG long-term disability program provides an annual benefit equal to 80% of base salary plus target annual bonus following disability. | | Healthcare | | ELG members are eligible to participate in the same health benefit program we offer to our other employees. | | Executive Physical | | ELG members are eligible for a comprehensive annual executive physical. | | Executive Leased Vehicle | | UTC provides ELG members with an annual allowance towardstoward the usecosts of a leased vehicle. The value of the allowance forvaries by ELG members varies with position. Leased vehicleappointment date. Any costs above the annual allowance are paid directly by the executive. | | Financial Planning | | Beginning in 2016, ELG members are eligible to receive an annual financial planning benefit up to $16,000 per year.benefit. | | Personal Aircraft Usage | | In January 2015, the Committee modified its policy onOur CEO is allowed personal use of Corporate aircraft. Mr. Hayes may now use the Corporate aircraft for up to 50 hours per year. Personal use of the Corporate aircraft by our President and CEO aligns with our security policy, and theThe Committee believes that itthis optimizes the most efficient use of Mr. Hayes’ time. Under this policy, Mr. Hayes may also fly commercially, subject to review by UTC security personnel. No other UTC employees are permitted to use the Corporate aircraft for personal reasons. |
| | | * | See footnote (5) to the Summary Compensation Table on page 61 for more details on these perquisites/benefits. |
| 46 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis SEVERANCE AND RETENTIONCHANGE-IN-CONTROL ARRANGEMENTS ELG members participate in severance and retentionchange-in-control arrangements consistent with practicesthat are similar to arrangements in effect at the majority of companies in our CPG. The Committee believes such arrangements help UTC maintain a competitive executive compensation program. OurAdditionally, our severance arrangements incorporateprogram incorporates post-employment restrictive covenants designed to protect UTC’s interests, including non-compete, non-solicitation and non-disclosure obligations. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 43 |
EXECUTIVE COMPENSATION: Compensation DiscussionSeverance and Analysis
The Potential Payments on Termination or Change-in-Control table on page 70 sets forth the estimated values and details of the termination benefits each NEO would receive under various hypothetical scenarios. How Our Severance Program has Evolved Over the last ten years, the Committee has made a number of modifications to the ELG severance program to both align with market best practices and to serve the evolving needs of the Company. Changes are generally prospective due to existing contractual commitments. Benefit eligibility, therefore, depends on the date the executive was appointed to the ELG. The following charttable below outlines these modifications: | | | ELG Appointment Date | | | | Prior to January 2006 | | Between January 2006
and April 2013 | | On or after May 2013 | | ELG Cash Separation Benefit | | 2.5x base salary | | 2.5x base salary | | No cash benefit | | Conditions to Receive CashSeparation Benefit | | • Mutually agreeable separation • 3+ years as an ELG member | | • Mutually agreeable separation prior to age 62 • 3+ years as an ELG member | | N/A | | ELG RSU Award | | No award granted | | Grant value equal to 2x base salary at time of grant | | Grant value up to $2 million, depending on role | | Conditions to Vest in theELG RSU Award | | N/A | | • Mutually agreeable separation on or after age 62 • 3+ years as an ELG member | | • Mutually agreeable separation • 3+ years as an ELG member | | NEO Participation | | Gregory Hayes
Alain Bellemare
Geraud Darnis | | Charles Gill, Jr.
Paul AdamsRobert McDonough | | Akhil Johri
Philippe Delpech
Robert Leduc |
How Our Severance Benefit Works Cash Separation Benefit.As shown in the table above, ELG members appointed prior to January 2006 may receive a cash separation payment equal to 2.5x base salary upon a mutually agreeable separation (defined below) following three years as an ELG member. Beginning in ELG members appointed between January 2006 and April 2013, however, only receive a cash separation benefit if a mutually agreeable separation after 3 years of ELG RSU awards have been granted upon appointmentservice occurs prior to the ELG. These awards receive dividend equivalents during the vesting period thatage 62. ELG appointees after May 2013 are reinvested as additional RSUs.not eligible for this benefit.
• | ELG Appointments between January 2006 and April 2013: ELG RSU awards are eligible to vest after three years of ELG service followed by a mutually agreeable separation on or after age 62 or following a change-in-control (as defined on page 45). Alternatively, if a mutually agreeable separation occurs prior to age 62 with three years as an ELG member, a cash separation payment equal to 2.5x base salary will be paid in lieu of vesting in the ELG RSU award. | | | • | ELG Appointments on or after May 2013: ELG RSU awards will vest in cases of either mutually agreeable separation after three years of ELG service or following a change-in-control (as defined on page 45). While post-May 2013 appointees have no age requirement for vesting in their ELG RSU awards, they are not eligible for a cash severance payment upon separation. |
A mutually agreeable separation occurs when: | • | An ELG member’s position with UTC has been eliminated or diminished by a divestiture, restructuring, shift in priorities or similar event; | | | | | • | An executive retires between age 62 and 65 with the Company’s consent; or |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 47 |
• | An executive retires at age 65 or older. |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis An executive retires at age 65 or older. Voluntary terminations prior to age 62, or terminations related to misconduct, do not qualify as mutually agreeable.agreeable separations. ELG RSU Awards.Beginning in January 2006, ELG RSU awards have been granted upon an executive’s appointment to the ELG. These awards receive dividend equivalents during the vesting period that are reinvested as additional RSUs. 44• | |
| • | ELG Appointments on or after May 2013:ELG RSU awards will vest in cases of a mutually agreeable separation after three years of ELG service (regardless of age) or following a change-in-control (as defined below). Post-May 2013 appointees are not eligible for a cash severance benefit upon separation. |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis
Change-in-Control Benefits Our Senior Executive Severance Plan (“SESP”) provides change-in-control severance protection designed to help ensure continuity of management in potential change-in-control situations. In response to changing market practices, we closed this program to new participants effective June 2009. For thoseAccordingly, Mr. Hayes is the only NEO who are stillis eligible to participate,for the program includesSESP benefit. The SESP provides a cash severance benefit of 2.99x the sum of base salary and the executive’s target annual bonus for the year in which termination occurs. Executives appointed to the ELG on or after June 2009 (including Messrs. Johri, McDonough, Delpech and Leduc), who do not participate in our Change-in-Control program andthe SESP, are instead covered by the standard ELG severance benefit (2.5x base salary and/or the vesting of ELG RSU awards) in the event of a change-in-control. Eligible ELG members may receive the greater of the SESP or the ELG cash severance benefits,separation benefit, but not both. A change-in-control generally occurs upon: | | (i)• | the acquisition of 20% of UTC’s outstanding shares by a person or a group; | | | (ii) | if | | • | incumbent directors no longer constitute aconstituting the majority of the Board; or | | | (iii) | | | • | a merger or similar event where UTC shareowners own less than 50% of the voting shares of the new organization. |
Benefits under both the legacy SESP and the UTC Long-Term Incentive Plan (“LTIP”) are subject to a “double trigger” wheretrigger,” under which benefits are provided only if a change-in-control is followed by an involuntary termination of employment or termination of employment for “good reason” within two years of thefollowing a change-in-control event. “Good reason” generally includes material adverse changes in an executive’s compensation, responsibilities, authority, reporting relationship or work location. Under the LTIP, inupon a change-in-control event, acceleratedthe vesting of outstanding equity awards will be accelerated, with performance-based awards will occuraccelerated at target levels. Role of Severance and Retention Benefits in Compensation Program
The Committee believes that with the program modifications previously described, the terms and conditions of our severance arrangements and change-in-control agreements for ELG members are market-competitive relative to our Compensation Peer Group and provide participating executives with a reasonable level of financial security. Because severance and change-in-control benefits are contingent on future events, they operate as a form of insurance rather than as a principal component of compensation strategy. The Committee, therefore, does not take these benefits into account when setting other elements of pay or measuring total direct compensation.
The Potential Payments on Termination or Change-in-Control table on page 67 sets forth the estimated values and details of the termination benefits each NEO would receive under various hypothetical scenarios.
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners48 | 45 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis How We View Executive Compensation The Summary Compensation Table on page 5760 provides annual compensation data presented in accordance with SECthe Securities and Exchange Commission’s (“SEC”) requirements. This SEC-mandated format is helpful for cross-company comparisons. However, the Committee feels that it does not fully represent all of the Committee’s annual compensation decisions and, in particular, does not provide the basis for a valid CEO pay-for-performance assessment. Therefore, when reviewing annual compensation, the Committee uses several alternative calculation methodologies, as described in this section and summarized in the chart on page 49.below. | SUMMARY COMPENSATION TABLE | | Summary Compensation
TableTOTAL DIRECT COMPENSATION | | Total Direct
CompensationREALIZABLE COMPENSATION | | Realizable CompensationREALIZED COMPENSATION | | Basic concept | | Realized Compensation | Basic concept | | | | | Uses SEC methodology, which includes a mix of both compensation actually earned during 20152016 and some future contingent pay opportunities | | Includes only pay that is directly linked to 20152016 performance | | 3-year average compensation measure which captures how our current shareUTC’s year-end stock price would affecteffects previously granted equity awards | | Includes only pay that was actually earned during 2015the year | Purpose | | | | | | | | Purpose | | | | | | | | SEC-mandated compensation disclosure | | Reflects the Committee’s compensation decisions based on 20152016 performance | | Used to evaluate pay-for- performancepay-for-performance alignment | | Used to evaluate pay-for- performance alignment | | | | | | | | | How it is calculated | |
| | | | | | Sum of: • Base salary paid in 2015
• Annual bonus earned for 2015 performance
• Dividend equivalents
• All other compensation
plus
| | Sum of: | | Three-year average of: | | Sum of: |  | |  | |  | |  |
| |  | Future pay opportunities that may or may not be realized, such as:• Accounting value of equity awards (SARs and PSUs) granted in 2015
• Change in the actuarial value of pension benefits
• Above market earnings of non-qualified deferred compensation
realized. | | | Sum of:
• Base salary set for 2015
• Annual bonus earned for 2015 performance
• Accounting value of equity awards (SARs and PSUs) granted in January 2016, reflecting 2015 performance
Excludes:
Pay elements outside the scope of the Committee’s annual compensation decisions, such as:
• Change in the actuarial value of pension benefits
• Dividend equivalents
• All other compensation
• Above market earnings of non-qualified deferred compensation
| | Three-year average of:
• Base salary paid
• Annual bonus earned
• Dividend equivalents
• In-the-money value(1)of equity awards (SARs and PSUs) granted during the prior three fiscal years (calculated based on the stock price at the end of the third year)
• Other direct(2) compensation
Excludes:
• Change in the actuarial value of pension benefits
• Other indirect(3) compensation
• Above market earnings of non-qualified deferred compensation
| | Sum of:
• Base salary paid in 2015
• Annual bonus earned for 2015 performance
• Dividend equivalents
• Gains in 2015 on options/SARs exercised and PSUs vested
• Other direct(2) compensation
Excludes:
• Change in the actuarial value of pension benefits
• Other indirect(3) compensation
• Above market earnings of non-qualified deferred compensation
|
| (1) | For a definition of in-the-money value refer to page 47.50. | | | | (2) | “Other direct compensationcompensation” includes personal use of the Corporate aircraft, leased vehicle paymentsexpenses, financial planning and other miscellaneous compensation elements. | | | | (3) | “Other indirect compensationcompensation” includes insurance premiums and Company contributions to non-qualified deferred compensation plans and defined contribution retirement plans. |
46Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis TOTAL DIRECT COMPENSATION Unlike the amounts reported in the Summary Compensation Table, total direct compensation represents the Committee’s pay decisions reflective of its assessment of Company, business unit and individual performance for 2016. For example, total direct compensation includes only pay elements that directlythe grant date fair value of long-term incentive awards granted in January 2017 which reflect the Committee’s assessment of Company and individual performance for 2015. For example,2016 performance. In contrast, the Summary Compensation Table shows the grant date fair value of long-term incentive awards granted in January 2015,2016 which reflectsreflect the Committee’s assessment of 20142015 performance. In contrast, total direct compensation reflects 2015 performance by instead including the grant date fair value of awards granted in January 2016. Other elements included in the Summary Compensation Table–Table – changes in pension values dividend equivalent payments and other formulaic compensation elements–elements – are not related to performance and outside the scope of the Committee’s annual pay decisions. Therefore, the Committee believes excludingExclusion of these elements from total direct compensation, therefore, renders a more accurate and up-to-date assessmentreflection of the Committee’s assessment of performance evaluation for the year. MR. HAYES: 2015CEO: SUMMARY COMPENSATION TABLE VS. TOTAL DIRECT COMPENSATION
| | | | 2016 Summary | | 2016 Total Direct | | Compensation Element (in thousands) | | 2015 Summary
Compensation Table | | 2015 Total Direct
Compensation | | Compensation Table | | Compensation | | Base Salary | | $1,300 | | $1,300 | | $1,450 | | $1,500 | | Annual Bonus | | $850 | | $850 | | $3,000 | | $3,000 | | Stock Awards | | $4,752 | | $4,869 | | $4,960 | | $7,878 | | | | (1/2/15 grant) | | (1/4/16 grant) | | (1/4/16 grant) | | (1/3/17 grant) | | Option Awards | | $3,280 | | $3,707 | | | Option / SAR Awards | | | $3,706 | | $2,589 | | | | (1/2/15 grant) | | (1/4/16 grant) | | (1/4/16 grant) | | (1/3/17 grant) | | Change in Pension Value + Non-Qualified Deferred Compensation Earnings | | $231 | | N/A | | | Change in Pension Value + Nonqualified Deferred Compensation Earnings | | | $2,393 | | N/A | | All Other Compensation | | $355 | | N/A | | $322 | | N/A | | Total | | $10,768 | | $10,726 | | $15,831 | | $14,967 |
REALIZABLE COMPENSATION The Committee does not believebelieves that neither the Summary Compensation Table ornor total direct compensation values adequately measure CEO compensation for the purpose of assessing pay-for-performance alignment. Both methods utilize accounting conventions to estimate values of long-term incentive awards at the time of grant. As might be expected, these estimated values can differ significantly from the actual value that is ultimately earned from these awards. For this reason, the Committee also considerslooks at “realizable compensation” which measures compensation based on a three-year average of salary, annual bonus, long-term incentive awards, non-equity incentive compensationdividend equivalents (if any) and other direct compensation elements. Realizable compensation plays an important role in helping the Committee assess the actual alignment of our compensation program’s alignmentprogram with shareowners’shareowner’s long-term interests. It captures the impact of UTC’s current share price performance on previously granted long-term incentive awards by using the “in-the-money” value for these awards rather than athe grant date fair value. The “in-the-money” value is defined as the difference between the closing price of our Common Stock at the end of the three-year measurement periodfiscal year and the exercise price of the award (if any) multiplied by the number of shares underlying SAR and PSU awards. By using this end-of-year stock price, realizable compensation directly correlates the value of an executive’s benefitlong-term incentive awards with the returnreturns our shareowners receivedreceive from investing in our Common Stock over the same period. An illustration of this alignment is shown in the charts on page 49.53. Also, unlike the Summary Compensation Table, realizable compensation excludes any change in the value of an executive’s pension benefits during the year. The change in pension value shown in the Summary Compensation Table does not represent actual payments to be received upon retirement. It merely reflects the change between the current and Proxy Statement and Notice of 2016 Annual Meeting of Shareowners50 | 47 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis and prior year’s actuarial estimate of pension benefits, a calculation based on actuarial assumptions and external economic factors, such as fluctuating interest rates. These calculations do not necessarily correlate with the value of actual benefits received. In addition, Mr. Hayes and some of the otherour U.S.-based NEOs hired prior to January 1, 2010 participate in a broad-based pension plan with the same benefit formula that appliesgenerally applicable to U.S. salaried employees hired prior to January 1, 2010.before that date. This plan does not measure individual or Company performance as assessed by the Committee and is therefore, in the Committee’s view, irrelevant to the CEO pay-for-performance assessment.
Realizable compensation also excludes other indirect compensation elements, such asincluding Company contributions to the UTC 401(k) Savings Planretirement and our non-qualified deferred compensation plans as well asin addition to ELG life insurance premiums. Since these elements are also not based onunrelated to performance, the Committee does not considerexcludes them relevant to thefrom its assessment of the CEO’s pay relative to his performance. MR. HAYES: THREE-YEAR HISTORY OFCEO REALIZABLE COMPENSATION(in thousands)
| Pay Elements | | Calculation Methodology | | 2013* | | 2014* | | 2015* | | Base Salary | | Average annual base salary for the year shown and the preceding two years. | | $805 | | $883 | | $1,040 | | Annual Bonus | | Average annual bonus earned for the year shown and the preceding two years. | | $1,173 | | $1,300 | | $1,183 | | Stock Awards | | Average annual value of vested and unvested PSU awards granted in the year shown and the preceding two years, based on UTC’s share price at the end of the year shown. For the completed three-year performance cycles, the calculation is based on the actual number of shares vested. For the two uncompleted three-year performance cycles, the calculation assumes that the target number of shares is earned. | | $2,917 | | $2,269 | | $2,230 | | Option Awards | | Average annual in-the-money value of SAR awards (vested and unvested) granted in the year shown and the preceding two years, calculated based on UTC’s share price at the end of the year shown. | | $3,850 | | $2,806 | | $430 | | Non-Equity IncentiveCompensation | | Average annual value of dividend equivalents paid in cash for the year shown and the preceding two years, under a legacy long-term incentive program that expired at the end of 2014. | | $324 | | $236 | | $121 | | Other DirectCompensation | | Average annual value of other direct compensation for the year shown and the preceding two years. Includes personal use of the Corporate aircraft, leased vehicle payments, and other miscellaneous compensation items. Excludes other indirect compensation, as defined on page 46. | | $49 | | $46 | | $66 | | Total Realizable Compensation | | $9,118 | | $7,540 | | $5,070 |
| Pay Elements | | Calculation Methodology | | 2014 | | 2015 | | 2016 | | Base Salary | | Three-year average base salary. | | $883 | | $1,040 | | $1,233 | | Annual Bonus | | Three-year average annual bonus. | | $1,300 | | $1,183 | | $1,817 | | Stock Awards | | Average value of PSUs granted in prior three years (including both vested and unvested awards), calculated using UTC’s closing stock price at the end of the year shown. For the completed three-year performance cycles, the calculation includes the actual number of shares that vested. For the two uncompleted three-year performance cycles, the calculation assumes shares will vest at target. | | $1,556 | | $1,634 | | $3,380 | | Option / SAR Awards | | Average in-the-money value of SARs granted in prior three years (including both vested and unvested), calculated using UTC’s closing stock price at the end of the year shown. | | $2,806 | | $430 | | $1,236 | | Dividend Equivalents | | Three-year average value of dividend equivalents paid in cash, under a legacy long-term incentive program that expired at the end of 2014. | | $236 | | $121 | | $18 | Other Direct
Compensation | | Three-year average value of “other direct compensation,” which includes personal use of Corporate aircraft, leased vehicle expenses, financial planning and other miscellaneous compensation items. Excludes “other indirect compensation,” as defined on page 49. | | $46 | | $66 | | $79 | | Total | | | | $6,827 | | $4,474 | | $7,763 |
*Compensation values shown in thousands.
The following table shows the actual or assumed vesting levels used for Mr. Hayes’ PSUs in the preceding table: | Grant Date | | Actual Shares Vested | | Vesting (as % of target) | | Actual Shares Vested | | Vesting(as % of target) | | 1/3/2011 | | 36,312 | | 136% | | | 1/3/2012 | | 29,070 | | 90% | | 29,070 | | 90% | | 1/3/2013 | | 11,528 | | 44% | | 11,528 | | 44% | | 1/2/2014 | | Awards not yet vested; target number of shares assumed | | 0 | | 0% | | 1/2/2015 | | | Awards not yet vested; target number of shares assumed | | 1/4/2016 | | |
48Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis REALIZED COMPENSATION The Committee also reviews “realized compensation” for purposes of assessing CEO pay-for-performance alignment. Realized compensation includes the amount actually earned during the year, but excludes amounts that may or may not be paid in the future. Realized compensation alsoIt incorporates any gains actually earned during the year from the vesting of PSUs or the exercise of stock options or SARs. Realized compensationThis provides the Committee with an additional relevant measure to assess the robustness of our pay-for-performance relationship by focusing on the strength of the correlation between UTC’s performance and the level ofactual cash and equity payouts and UTC’s performance.earned by our CEO. Although the decision to exercise stock options and SARs resides with the executive and therefore may not always correlate precisely with Company performance over specific time periods, the timing ofvalue realized from exercises oftengenerally aligns with stock price appreciation. Changes in pension values, non-qualifed deferred compensation earnings and other indirect compensation elements are excluded from realized compensation for the same reasons noted in the discussion of realizable compensation on page 48.51. An illustration of this alignment is shown in the charts on page 53. MR. HAYES: THREE-YEAR HISTORY OFCEO REALIZED COMPENSATION(in thousands)
| Pay Elements | | Calculation Methodology | | 2013* | | 2014* | | 2015* | | Calculation Methodology | | 2014 | | 2015 | | 2016 | | Base Salary | | Base salary paid during the year shown. | | $870 | | $950 | | $1,300 | | Base salary paid during the year shown. | | $950 | | $1,300 | | $1,450 | | Annual Bonus | | Annual bonus earned for performance during the year shown. | | $1,100 | | $1,600 | | $850 | | Annual bonus earned for performance during the year shown. | | $1,600 | | $850 | | $3,000 | | Stock Awards | | Realized gains on PSUs that vested during the year shown. | | $2,156 | | $4,052 | | $3,469 | | Realized gains on PSUs that vested during the year shown. | | $4,052 | | $3,469 | | $1,002 | | Option Awards | | Realized gains on stock options and SARs exercised during the year shown. | | $15,387 | | $2,990 | | $0 | | | Non-Equity IncentiveCompensation | | Value of dividend equivalents paid in cash during the year shown, under a legacy long-term incentive program that expired at the end of 2014. | | $308 | | $54 | | $0 | | | Option / SAR Awards | | | Realized gains on SARs exercised during the year shown. | | $2,990 | | $0 | | $5,611 | | Dividend Equivalents | | | Value of dividend equivalents paid in cash during the year shown under a legacy long-term incentive program that expired at the end of 2014. | | $54 | | $0 | | $0 | | Other DirectCompensation | | Value of other direct compensation for the year shown. Includes personal use of the Corporate aircraft, leased vehicle payments, and other miscellaneous compensation items. Excludes other indirect compensation, as defined on page 46. | | $56 | | $34 | | $106 | | Value of “other direct compensation” for the year shown, which includes personal use of Corporate aircraft, leased vehicle expenses, financial planning and other miscellaneous compensation items. Excludes “other indirect compensation,” as defined on page 49. | | $34 | | $106 | | $95 | | Total Realized Compensation | | $19,877 | | $9,680 | | $5,725 | | | Total | | | | $9,680 | | $5,725 | | $11,158 |
| 52 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis *Compensation values shown in thousands.
SUMMARY COMPENSATION TABLE VS. REALIZABLE AND REALIZED COMPENSATIONCEO PAY-FOR-PERFORMANCE
The following charts compare the Summary Compensation Table values reported for Mr. Hayes for the past three years to his realizable and realized compensation for the same time period. As shown in theThe charts below not only show that the correlation between TSR and realizable and realized compensation is stronger than the correlation between TSR and Summary Compensation Table values.values, but reinforces our program’s strong pay-for-performance alignment. Summary Compensation TableTable* | | Realizable Compensation* | | Realized Compensation* | | Total Shareowner Return1-Year TSR | (thousands) | | (thousands) | | (thousands) | | (1-Year TSR) |  | |  | |  | |  |
* Values shown in thousands. Refer to the tabletables on page 48pages 49-52 to see how we calculate realizable compensation and the preceding table for how realized compensation is calculated.compensation. Proxy Statement and Notice of 20162017 Annual Meeting of Shareowners and Proxy Statement | 4953 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis Pay Decisions for Named Executive Officers (NEOs) The Committee makes compensation decisions for our NEOs based on their individual performance and the overall performance of the Company, business unit and/or function, where applicable. The following pages show each NEO’s 2016 total direct compensation values. As discussed on page 47,50, total direct compensation representsincludes only those pay elements that directly reflect the Committee’s 2015assessment of 2016 performance (includes 2017 LTI grants, rather than 2016 LTI grants). We also provide individual performance highlights that played a role in the Committee’s pay decisions for each of the principal elements of compensation (i.e., base salary, annual bonus, long-term incentives). Unlike the Summary Compensation Table, which includes the long-term incentive award (PSUs and SARs) granted in January 2015 reflecting 2014 performance, total direct compensation includes the PSU and SAR awards granted in January 2016 reflecting the Committee’s assessment of 2015 performance. The charts shown for each NEO in the following pages display the total direct compensation value delivered in each of the principal elements of compensation. These charts do not include amounts paid to Mr. Johri to offset compensation he forfeited upon leaving his former employer. Additionally, since Mr. Darnis retired on January 31, 2016 and did not receive a 2016 long-term incentive grant, the total direct compensation shown in the chart on page 52 does not include 2016 PSU and SAR awards.NEO.
| GREGORY HAYES | | | | | |  |  | | Age:55
UTC Experience:26 years
|
Individual Performance Highlights
• Effectively driving UTC’s portfolio transformation, including the accelerated completion of the sale of Sikorsky Aircraft and the acquisition of a number of businesses better aligned with UTC’s core markets and segments
• Simplification of UTC’s organizational structure, providing greater transparency and more direct accountability
• Rigorous commitment to a disciplined capital allocation strategy, evidenced by the $12 billion we returned to shareowners in 2015 through dividends and share repurchases (including the $6 billion accelerated share buyback program announced in November 2015)
• Efficient transition to a new senior leadership team with a strong focus on operational excellence and a renewed emphasis on succession planning
• Achievement of aggressive pre-established environmental goals
• Listed as one of the 2016 Best CEOs in the aerospace and defense electronics category byInstitutional Investor Magazine for his effective communication with shareowners and analysts
| 
President andChairman & Chief Executive Officer
The Committee assessed Mr. Hayes’ 2016 performance favorably in his first full year as President and CEO.favorably. Under his leadership, UTC successfully executed its 2016 financial, strategic and operational objectives intended to drive sustained, long-term growth and increasedincrease shareowner value. TotalOverall, total direct compensation decreased slightlyincreased from $10.93 million in 2014 to $10.73$10.82 million in 2015 directly attributable to a decrease$14.97 million in 2016.
Base Salary. To better align Mr. Hayes with the Company’s 2015CPG median, the Committee increased his base salary from $1.3 to $1.5 million, effective April 1, 2016. Annual Bonus. UTC’s 2016 annual bonus financial performance factor compared to the prior year. 2015 adjustedreflects net income and free cash flow performance. Adjusted net income of $5.563$5.46 billion fell short ofexceeded the $6.282$5.35 billion annual bonus target set for the year,goal, resulting in a vestingpayout factor of 0%127% for the earnings portion of the annual bonus award.metric. The 2015 ratio of free cash flow to net income used to calculate thefor annual bonus performance factorpurposes equaled 99%, compared to the 90% goal. This resulted in a target of 100%.108% payout factor for the UTC cash flow metric. In combination, these factors resulted inresults generated a 39%120% bonus factor attributable to UTC’s 2016 financial performance, factor for purposes of determiningsubstantially greater than the 2015 annual bonus awards.factor.
The Committee utilized these results,this factor, along with the favorable individual performance considerations noted here and awarded Mr. Hayes an $850,000a $3 million annual bonus, anbonus. This amount that closely aligns with the Company’s 39%120% financial performance factor. LTI. Mr. Hayes’ 20162017 long-term incentive award recognizesreflects the Committee’s favorable assessment of his 20152016 performance. The value of his 20162017 award equals $8.58$10.47 million, an amount exceedingwhich exceeds the $8.03 million award made in 2015value of his 2016 grant but remains below the CPG median, reflecting his briefrelatively short tenure as CEO. | | Age:56 UTC Experience:27 years Individual Performance Highlights • Elected Chairman of the Board, evidencing the Board’s confidence in Mr. Hayes’ leadership. • Achieved EPS growth of 35% and adjusted EPS growth of 5%, as well as net sales growth of 2% (GAAP and adjusted). • Returned $4.3 billion to shareowners in 2016 through dividends and share repurchases. • Made substantial R&D investments in product and process innovations that enhance UTC’s long-term growth prospects. • Achieved critical aerospace program milestones during 2016, including the entry into service of the Airbus A320neo and the first flight of the next-generation Embraer E-Jet E2, both powered by Pratt & Whitney’s PurePower GTF engines. • Continued efforts to reduce UTC’s global environmental impact by setting aggressive sustainability goals and supporting the development of green technologies. |
5054 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis | AKHIL JOHRI | | | | | | | | |  |  | | Age:54
UTC Experience:27 years
|
Individual Performance Highlights
• His role in the negotiations and transition efforts related to the successful sale of Sikorsky Aircraft, which closed on an expedited timeline
• Ranked #1 2016 Best CFO in the aerospace and defense electronics category byInstitutional Investor Magazine
• His efforts towards the implementation of the announced multi-year $1.5 billion cost reduction plan, which included $400 million in restructuring in 2015
• Successful execution of UTC’s disciplined capital allocation strategy, including the $12 billion returned to shareowners in 2015 through dividends and share repurchases (including the $6 billion accelerated share buyback program announced in November 2015)
• Strategic financial leadership in positioning UTC to maximize future growth opportunities through $538 million in acquisitions and $3.9 billion in Company and customer-funded research and development investments made in 2015
Executive Vice President & Chief Financial Officer The Committee approved
Base Salary. During 2016, Mr. Johri received a merit increase along with a market adjustment to his base salary, resulting in an aggregate increase from $700,000 to $825,000. This increase reflected the Committee’s favorable assessment of $700,000 forhis performance, as well as its efforts to better align his base salary with the CPG and Fortune 100 market medians. Following these increases, Mr. Johri upon his return to UTC on January 1, 2015.Johri’s base salary remains slightly below the market median. Annual Bonus. For purposes ofMr. Johri’s 2016 annual bonus, determination, the Committee considered the UTC financial performance factor of 39%120%, as discussed on the prior page, his effective leadership of theUTC’s finance organization and the individual performance considerations noted here. Based on these factors, the Committeehere and awarded Mr. Johri a $375,000$1.1 million annual bonus, anbonus. This amount was slightly above the UTC financial performance factor but below the market median.factor. Reflecting its favorable assessmentLTI. In consideration of Mr. Johri’s 2015strong 2016 performance, the Committee granted him a 20162017 long-term incentive award valued at $2.79 million. The value of this award falls below$3.55 million, an amount which slightly exceeds the CPG and Fortune 100 market median, reflectingmedians.
| | Age:55 UTC Experience:28 years Individual Performance Highlights • Mr. Johri’s brief tenure as CFO.leadership substantially contributed to the Company’s solid 2016 financial performance, including growth in diluted EPS and net sales. | • Reduced UTC’s future balance sheet risk through cost-effective transactions that eliminated approximately $1.7 billion in U.S. pension liabilities. • Continued the successful implementation of UTC’s cost reduction initiatives, with expected savings of $900 million by 2019. • Executed UTC’s disciplined capital allocation strategy, returning $4.3 billion to shareowners in 2016 through dividends and share repurchases. • Ranked among the best CFOs in the aerospace and defense electronics sector byInstitutional Investor Magazine. |
Proxy Statement and Notice of 20162017 Annual Meeting of Shareowners and Proxy Statement | 5155 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis GERAUD DARNIS | ROBERT MCDONOUGH | |
| | |  |  | | Age:56
UTC Experience:32 years
Individual Performance Highlights
• Selection of Otis to install elevators and escalators at the landmark New York City Hudson Yards development projectPresident, UTC Climate, Controls & Security
• Otis’ contract win valued at more than $100 million to provide 370 elevators and 104 escalators to the world’s largest hotel, the Abraj Kudai in Saudi Arabia
• Significant UTC CCS’ contract wins for the Sheikh Jaber Al Ahmad Culture Center in Kuwait and the new Atlanta Braves stadium
• Rollout of upgraded North American Residential HVAC products which meet the 2015 Regional Efficiency Standards
• Launch ofBase Salary. Mr. McDonough received a number of new or upgraded products, including the Advanced Diesel Engine truck trailer and Orion container platforms for transportation refrigeration
| President & Chief Executive Officer,
UTC Building & Industrial Systems
Mr. Darnis received abase salary increase from $1,050,000$750,000 to $1,100,000 effective April 1, 2015,$825,000, reflecting the Committee’s ongoing favorable assessment of his performance leading UTC’s $28.7 billion commercial businesses.performance. Mr. McDonough’s base salary now approximates the CPG median.
For purposes of annual bonus determination, the Committee weightedAnnual Bonus. The financial performance factors for the Company (39%, as previously discussed)UTC (120%) and for UTC Building & Industrial Systems (73%CCS (98%), which resulted in combination, generated a blended financial performance factor of 59%107% of target.target for UTC CCS. Based on these results, along with the individual performance considerations listednoted here, the Committee awarded Mr. DarnisMcDonough an annual bonus of $710,000,$1.1 million, an amount that aligns with thisis moderately above UTC CCS’ blended financial performance factor.
LTI. In consideration of Mr. Darnis retired effective January 31,McDonough’s 2016 and therefore, did not receiveperformance, the Committee granted him a 20162017 long-term incentive award.award valued at $3.79 million, an amount above the CPG median. | | Age:57 UTC Experience:9 years Individual Performance Highlights • Successful acquisition of controlling interest in Riello Group S.p.A. • Launched 132 new products during 2016. Examples include: Onity DirectKey mobile access solution, which provides hotel guests an easy, secure way to use their smartphone as a room key and to enter other access controlled areas; Carrier’s Connect WiFi thermostat for commercial buildings, which allows remote digital building control; and The Côr home automation system, which enables homeowners to secure, control and remotely manage home systems from a mobile application via their connected devices. • Significant contract wins, including: Design and installation of security and extra low voltage systems for the Lisboa Palace project in Macau, China. NORESCO’s guaranteed energy savings performance contract (ESPC) to implement infrastructure upgrades at two major U.S. Department of Veterans Affairs (VA) medical centers. |
5256 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis PAUL ADAMS | PHILIPPE DELPECH | |
| | |  |  
President, Otis Elevator Base Salary. Mr. Delpech received a base salary increase from $750,000 to $800,100, reflecting the Committee’s favorable assessment of his performance. Mr. Delpech’s salary is now slightly above the CPG median. Annual Bonus. The financial performance factors for UTC (120%) and Otis (103%) resulted in a blended financial performance factor of 110% of target for Otis. Based on these results, along with the individual performance considerations noted here, the Committee awarded Mr. Delpech an annual bonus of $850,000, an amount that aligns with Otis’ blended financial performance factor. LTI. In consideration of Mr. Delpech’s 2016 performance, the Committee granted him a 2017 long-term incentive award valued at $3.79 million, an amount above the CPG median. | | Age:54
UTC Experience:16 years Individual Performance Highlights • Certification byIncreased engineering investment, enabling Otis to nearly double the FAA and EASAnumber of the GTF engineproducts launched in 2015, well ahead of competitors2016 compared to 2015. • CertificationBegan implementation of the GTF-powered Airbus A320neoa transformational digital strategy to better connect Otis’ mechanics and the Bombardier CSeries aircraftcustomers with their equipment. • First flightsIntroduced the next generation of the GTF-powered Gulfstream G500Gen2 elevator, which increases connectivity, space and the Mitsubishi Regional Jet aircraftenergy efficiency. • First flights of the Boeing KC-46A tanker and the Embraer KC-390 transportSignificant building contract wins, including: • Achievement of initial operational capability for the Joint Strike Fighter’s F135 engine for the U.S. MarinesInternational Financial Centre (Shenzhen, China); and
• On-time first engine test for the Irkut MC-21 and Embraer EJet2 programsTwentytwo Bishopsgate (London, England).
| President, Pratt & Whitney
Mr. Adams received a salary increase from $550,000 to $650,000 effective April 1, 2015, recognizing the elevation of his position in UTC’s revised organizational structure.
For purposes of annual bonus determination, the weighted performance relative to the Company and Pratt & Whitney targets generated a financial performance factor of 73% of target. The Committee considered this result, along with the individual performance considerations noted here, and awarded Mr. Adams a $450,000 annual bonus, an amount that aligns with this financial performance factor.
Also in consideration of Mr. Adams’ 2015 performance, the Committee granted him a 2016 long-term incentive award valued at $2.56 million. Separately, at the end of 2015, the Committee also awarded Mr. Adams a $1 million special RSU grant in recognition for his role in achieving FAA and EASA certification for the GTF engine, a significant milestone for UTC.
| |
Proxy Statement and Notice of 20162017 Annual Meeting of Shareowners and Proxy Statement | 5357 |
EXECUTIVE COMPENSATION: Compensation Discussion and Analysis CHARLES GILL, JR. | | | | | |  |  | | Age:51
UTC Experience:21 years
Individual Performance Highlights
• Successfully managed UTC’s most significant litigation, investigative, contractual, intellectual property and environmental, health and safety matters
• Managed the legal aspects of UTC’s M&A transactions, including the successful sale of Sikorsky Aircraft, where regulatory approvals and closing were achieved on an expedited basis
• Maintained a “best-in-class” ethics and compliance culture, including strong leadership of UTC’s ongoing efforts to build an effective and sustainable International Trade Compliance program
• Efforts to further enhance the Company’s Enterprise Risk Management program and effectively focus the Board and senior management on UTC’s most significant risks
• Ongoing efforts to assure UTC maintains corporate governance best practices, including proactive implementation of proxy access in 2015
| Executive Vice President & General Counsel
Mr. Gill received a salary increase from $685,000 to $725,000 effective April 1, 2015. This increase brings Mr. Gill’s salary to approximately the market median, reflecting the Committee’s favorable assessment of his performance throughout his tenure.
For purposes of annual bonus determination, the Committee considered the UTC financial performance factor of 39%, as discussed on prior pages, his effective leadership of the legal organization and the individual performance considerations noted here. Based on these factors, the Committee awarded Mr. Gill a $375,000 annual bonus, an amount above the financial performance factor but below the market median.
Reflecting its favorable assessment of Mr. Gill’s 2015 performance, the Committee granted him a 2016 long-term incentive award valued at $2.79 million. The value of this award falls above the market median, recognizing Mr. Gill’s 2015 performance and extended tenure in his role.
| |
54 | |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis
Program Administration
EXPLANATION OF FINANCIAL PERFORMANCE MEASURES USED IN INCENTIVE COMPENSATION PLANS
All performance measures are based on performance of continuing operations, unless otherwise noted.
Plan President, Pratt & Whitney Base Salary. Mr. Leduc received a market adjustment to his base salary from $675,000 to $750,000 in 2016. This increase reflected the Committee’s favorable assessment of his performance and its efforts to better align his base salary with the CPG market median. Mr. Leduc’s base salary remains slightly below the CPG median. Annual Bonus. The financial performance factors for UTC (120%) and for Pratt & Whitney (47%) resulted in a blended financial performance factor of 76% of target for Pratt & Whitney. Based on operational challenges during 2016, the Committee reduced Pratt & Whitney’s financial performance factor to 64% of target. Nevertheless, the Committee determined that Mr. Leduc’s effective individual leadership addressing Pratt & Whitney’s operational challenges warranted an annual bonus of $600,000, an amount moderately above this adjusted factor. LTI. Reflecting its favorable assessment of Mr. Leduc’s 2016 performance, the Committee granted him a 2017 long-term incentive award valued at $3.79 million, an amount above the CPG median. | | MetricAge:
| | 60 UTC Experience: | | Business Units38 years | ANNUAL
INCENTIVE | | Earnings | | Net income, as defined below. | | Earnings before interestIndividual Performance Highlights • Awarded a $1.5 billion contract from the U.S. Department of Defense for the F135 propulsion systems for all three variants of the F-35 Lightning II aircraft. • Successful entries into service of the Airbus A320neo and taxes less:
Bombardier C Series aircraft and the first flight of the Embraer E-Jet E2 aircraft, all powered by Pratt & Whitney’s PurePower GTF engines. • Restructuring costs;
Selection of Pratt & Whitney to provide engines for the U.S. Air Force’s B-21 Raider.• Non-recurring items;
Increased total GTF engine firm and option orders to more than 8,000 in 2016, while implementing production processes necessary to meet customer demand and record backlog.• Significant, defined non-operational items;Skillful management of operational and
• Impact of significant acquisitions/divestitures | | Free Cash Flow | | Consolidated net cash flow provided by operating activities, less capital expenditures (as reported in the 2015 Annual Report on Form 10-K), adjusted for restructuring, non- recurring and other significant, defined non-operational items. | | Internal measure based on consolidated net cash flow provided by operating activities, less capital expenditure (both as reported in the 2015 Annual Report on Form 10-K), and adjusted for restructuring and other certain significant, non-recurring and non-operational items. | | Net Income | | UTC’s net income attributable to common shareowners, as reported in the 2015 Annual Report on Form 10-K, but excluding restructuring, non-recurring and other significant, defined non-operational items. For a reconciliation to U.S. GAAP, refer to Appendix B on page 86. | | Internal measure consisting of each business unit’s respective share of UTC net income attributable to common shareowners, but excluding restructuring and other significant non-recurring and non- operational items. | LONG-TERMINCENTIVE | | Earnings PerShare | | Diluted earnings per share, subject to adjustments for restructuring, non-recurring and other significant, defined non-operational items. For a reconciliation to U.S. GAAP, please refer to Appendix B on page 86. | | TotalShareownerReturn | | Total investment return on Common Stock between two points in time, using a trailing 60-day average, calculated to account for changes in share price and reinvested dividends. certification challenges arising from multiple new engine development programs. |
DILUTION AND TAX DEDUCTIBILITYDilution and Tax Deductibility
Dilution.Under the UTC Long-Term Incentive Plan (“LTIP”), as approved by our shareowners, the total number of shares underlying equity-based awards issued in 20152016 was approximatelyless than 1% of shares outstanding, well within LTIP share limitations. As of the end of 2015,2016, the total number of shares that could be issued under the LTIP was approximately 9% of shares outstanding (calculated on a fully diluted basis), which is approximately atgenerally aligns with the CPG median. UTC’s diluted earnings per share reflect all such shares. Tax Deductibility.The Committee considers tax deductibility among many other factors when making compensation decisions. To the extent consistent with other compensation objectives, the Committee seeks to maximize UTC’s tax deduction relativerelated to compensation paid.compensation. Internal Revenue Code Section 162(m) limits UTC’s deduction to $1 million for annual compensation paid to the CEO and each of the three other most highly compensated NEOs (excluding the CFO). However, this limitation does not apply to compensation that qualifies as “performance-based compensation” within the meaning of Section 162(m). Annual bonuses, SARs / stock options and performance-based long-term incentive awards are generally intended to qualify as performance-based compensation exempt from the $1 million deduction limit. Other compensation elements are subject to the $1 million deduction limit. However, there can be no assurance that such compensation will qualify as performance-based compensation under all circumstances. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners58 | 55 |
Report of the Committee on Compensation and Executive Development The Committee on Compensation and Executive Development establishes and oversees the design and function of UTC’s executive compensation program. We have reviewed and discussed the foregoing Compensation Discussion and Analysis with the management of the Company and recommended to the Board of Directors that the Compensation Discussion and Analysis be included in UTC’s Proxy Statement for the 20162017 Annual Meeting. Committee on Compensation and Executive Development
| Committee on Compensation and Executive Development | | Jean-Pierre Garnier, Chair | Richard B. MyersHarold McGraw III | | John V. Faraci | Brian C. Rogers | | Edward A. Kangas | H. Patrick Swygert | Harold McGraw IIIEllen J. Kullman | |
56Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
Compensation Tables SUMMARY COMPENSATION TABLE | Year | | Salary ($) | | Bonus ($) | (1) | | Stock
Awards ($) | (2) | | Option
Awards ($) | (3) | | Non-Equity
Incentive Plan
Compensation
($) | (4) | | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($) | (5) | | All Other
Compensation
($) | (6) | | Total ($) | | Total Without
Change in
Pension
Value ($) | | Salary ($) | | Bonus ($) | (1) | | Stock
Awards ($) | (2) | | Option
Awards ($) | (3) | | Non-Equity
Incentive Plan
Compensation
($) | | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($) | (4) | | All Other
Compensation
($) | (5) | | Total ($) | | Total Without
Change in
Pension
Value ($) | | GREGORY HAYESPresident and Chief Executive Officer | | | | | | | | | | | | GREGORY HAYESChairman & Chief Executive Officer | | GREGORY HAYESChairman & Chief Executive Officer | | | | | | 2016 | | | $1,450,000 | | $3,000,000 | | | $4,960,217 | | | $3,706,560 | | | $0 | | $2,392,716 | (6) | | $321,842 | | | $15,831,335 | | $13,448,390 | | 2015 | | $1,300,000 | | $850,000 | | | $4,752,443 | | | $3,280,210 | | | $0 | | | $230,673 | | | $354,502 | | | $10,767,828 | | $10,547,063 | | $1,300,000 | | $850,000 | | | $4,752,443 | | | $3,280,210 | | | $0 | | $230,673 | | | $354,502 | | | $10,767,828 | | $10,547,063 | | 2014 | | $949,583 | | $1,600,000 | | | $2,332,626 | | | $2,029,885 | | | $54,280 | | | $1,825,890 | | | $193,910 | | | $8,986,174 | | $7,169,083 | | $949,583 | | $1,600,000 | | | $2,332,626 | | | $2,029,885 | | | $54,280 | | $1,825,890 | | | $193,910 | | | $8,986,174 | | $7,169,083 | | 2013 | | $870,000 | | $1,100,000 | | | $2,401,885 | | | $2,029,790 | | | $307,972 | | | $714,459 | | | $206,967 | | | $7,631,073 | | $6,924,841 | | | AKHIL JOHRIExecutive Vice President & Chief Financial Officer | AKHIL JOHRIExecutive Vice President & Chief Financial Officer | | | | | | | | | AKHIL JOHRIExecutive Vice President & Chief Financial Officer | | | | | | | | | | 2016 | | | $766,667 | | $1,100,000 | | | $1,609,731 | | | $1,207,440 | | | $0 | | $151,840 | | | $259,356 | | | $5,095,034 | | $4,943,194 | | 2015 | | $700,000 | | $1,040,000 | (7) | | $6,770,654 | | | $3,470,482 | | | $0 | | | $1,174 | | | $386,405 | | | $12,368,715 | | $12,367,541 | | $700,000 | | $1,040,000 | | | $6,770,654 | | | $3,470,482 | | | $0 | | $1,174 | | | $386,405 | | | $12,368,715 | | $12,367,541 | | GERAUD DARNISPresident & Chief Executive Officer, UTC Building & Industrial Systems(8) | | | | | | | | 2015 | | $1,087,500 | | $710,000 | | | $2,646,930 | | | $1,823,440 | | | $0 | | | $7,916,196 | (9) | | $225,592 | | | $14,409,658 | | $6,493,462 | | | 2014 | | $1,037,500 | | $1,200,000 | | | $2,257,380 | | | $5,897,475 | | | $177,000 | | | $2,340,071 | | | $200,843 | | | $13,110,269 | | $10,770,198 | | | 2013 | | $982,500 | | $1,100,000 | | | $2,374,383 | | | $2,001,335 | | | $548,140 | | | $670,607 | | | $253,504 | | | $7,930,469 | | $7,259,862 | | | PAUL ADAMSPresident, Pratt & Whitney(8) | | | | | | | | | | | | | | 2015 | | $608,172 | | $450,000 | | | $2,480,720 | | | $1,020,730 | | | $0 | | | $512,146 | (9) | | $140,341 | | | $5,212,109 | | $4,699,963 | | | CHARLES GILL, JR.Executive Vice President & General Counsel | | | | | | | | | | 2015 | | $715,000 | | $375,000 | | | $1,852,851 | | | $1,278,390 | | | $0 | | | $90,103 | | | $154,811 | | | $4,466,155 | | $4,376,052 | | | 2014 | | $676,250 | | $750,000 | | | $1,655,412 | | | $1,433,695 | | | $0 | | | $1,833,339 | | | $146,588 | | | $6,495,284 | | $4,661,945 | | | ALAIN BELLEMAREFormer President & Chief Executive Officer, UTC Propulsion & Aerospace Systems(8) | | | | | | | | 2015 | | $75,000 | | $0 | | | $1,852,851 | | | $1,278,390 | | | $0 | | | $1,854,613 | (9) | | $2,506,739 | | | $7,567,593 | | $5,712,980 | | | 2014 | | $881,250 | | $1,000,000 | | | $2,257,380 | | | $1,958,910 | | | $0 | | | $1,663,495 | | | $220,646 | | | $7,981,681 | | $6,318,186 | | | 2013 | | $816,667 | | $1,050,000 | | | $2,264,373 | | | $1,906,485 | | | $68,480 | | | $408,341 | | | $228,691 | | | $6,743,037 | | $6,334,696 | | | ROBERT MCDONOUGHPresident, UTC Climate, Controls & Security | | ROBERT MCDONOUGHPresident, UTC Climate, Controls & Security | | | | | | | | 2016 | | | $806,250 | | $1,100,000 | | | $2,470,750 | | | $1,853,280 | | | $0 | | $149,742 | | | $136,899 | | | $6,516,921 | | $6,367,179 | | PHILIPPE DELPECHPresident, Otis Elevator(7) | | PHILIPPE DELPECHPresident, Otis Elevator(7) | | | | | | | | | | 2016 | | | $790,245 | | $850,000 | | | $2,470,750 | | | $1,853,280 | | | $0 | | $0 | | | $461,607 | | | $6,425,882 | | $6,425,882 | | ROBERT LEDUCPresident, Pratt & Whitney | | ROBERT LEDUCPresident, Pratt & Whitney | | | | | | | | | | 2016 | | | $665,057 | | $600,000 | | | $2,829,436 | | | $1,107,040 | | | $0 | | $350,287 | | | $112,104 | | | $5,663,924 | | $5,313,637 |
(1)(1) | Bonus. Cash bonuses are provided under the UTC Annual Executive Incentive Compensation Plan. Payments are primarily based on measured performance against pre-established targets. However, the Committee retains discretion to adjust annual bonus amounts.amounts based on its assessment of overall performance. Consequently, we report annual bonuses in the Bonus column of the Summary Compensation Table rather than in the Non-Equity Incentive Plan Compensation column. | | | | | (2) | Stock Awards.Awards. Grant date fair value of PSUs and RSUs issued under the LTIP, calculated in accordance with the Compensation-Stock Compensation Topic of the FASB ASC, but excluding the effect of estimated forfeitures. The assumptions made in calculating the fair value of these awards are set forth in Note 12, Employee Benefit Plans to the Consolidated Financial Statements in Exhibit 13 to UTC’s 20152016 Annual Report on Form 10-K (“20152016 Form 10-K”). PSU awards are discussed in the CD&A and in footnote (2) to the Grants of Plan-Based Awards table on page 5962 of this Proxy Statement. The grant date fair values shown for PSU awards granted to our NEOs assume target-level performance. If the highest level of performance is achieved, the grant date fair values would be: Mr. Hayes, $6,886,035;$8,225,017; Mr. Johri, $1,691,001;$2,669,251; Mr. Darnis, $3,835,260;McDonough, $4,096,990; Mr. Adams, $2,144,259; Mr. Gill, $2,684,682Delpech, $4,096,990; and Mr. Bellemare, $2,684,682. For Mr Johri, amountsLeduc, $2,450,483. Amounts shown for Mr. Leduc include a special RSU award and an ELG RSU award granted upon his appointment to the ELG, both as an offset to awards Mr. Johri forfeited from his former employer. Amounts for Mr. Adams include a special RSU award granted in recognition of the GTF engine receiving FAA and EASA certification.ELG. | | | | | (3) | Option Awards. Grant date fair value of SARs or stock options granted under the LTIP, calculated in accordance with the Compensation-Stock Compensation Topic of the FASB ASC, but excluding the effect of estimated forfeitures. The assumptions made in the valuation of these awards are set forth in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 20152016 Form 10-K. ForAll NEOs received SARs, except Mr. Johri, amounts shown include a SAR award granted as an offset to awards Mr. Johri forfeited from his former employer.Delpech who received stock options in lieu of SARs. | | | | | (4) | Non-Equity Incentive Plan Compensation. Quarterly cash dividend payments received in 2014 and 2013, pursuant to awards earned in prior years under the Continuous Improvement Incentive Program, a legacy long-term incentive plan. The last awards under this program were granted in 2005 and expired on December 31, 2014. Under this program, an executive could earn (depending on performance relative to pre-established three-year targets) the right to receive up to seven years of quarterly cash dividend equivalent payments equal to the dividend paid on the number of shares of Common Stock underlying certain unexercised stock options previously granted to the executive. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 57 |
COMPENSATION TABLES
(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings.Earnings. Amounts in this column reflect the increase during 20152016 in the actuarial present value of each executive’s accrued benefit under UTC’s defined benefit plans. Actuarial value computations are based on the assumptions established in accordance with the Compensation–Retirement Benefits Topic of the FASB ASC and discussed in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 20152016 Form 10-K. UTC does not provide above-marketAbove-market rates of return (defined by SEC rules as a rate that exceeds 120% of the federal long-term rate)are not provided under the UTC Deferred Compensation Plan.UTC’s deferred compensation plans. However, an above-market interest rate is paid under the frozen Sundstrand Corporation Deferred Compensation Plan, which was assumed by UTC upon the acquisition of Sundstrand in 1999. Mr. Hayes accrued $9,908$9,771 in above-market earnings under this plan in 2015.2016. |
| 60 | |
COMPENSATION TABLES (6)(5) | All Other Compensation.Compensation. The 20152016 amounts in this column consist of the following items: |
| Name | | Personal Use
of Corporate
Aircraft | (a) | | Leased
Vehicle
Payments | (b) | | Insurance
Premiums | (c) | | 401(k) Plan
Company
Contributions | (d) | | Company
Contributions
to Deferred
Compensation
Plans | (e) | | Severance | (f) | | Relocation | (g) | | Miscellaneous | (h) | | Total | | G. Hayes | | $78,179 | | | $21,551 | | | $143,741 | | | $9,540 | | | $94,860 | | | $0 | | | $0 | | | $6,631 | | | $354,502 | | A. Johri | | $0 | | | $17,884 | | | $117,597 | | | $22,373 | | | $25,667 | | | $0 | | | $202,027 | | | $857 | | | $386,405 | | G. Darnis | | $0 | | | $53,325 | | | $68,068 | | | $9,540 | | | $89,302 | | | $0 | | | $0 | | | $5,357 | | | $225,592 | | P. Adams | | $0 | | | $29,027 | | | $63,663 | | | $9,540 | | | $35,754 | | | $0 | | | $0 | | | $2,357 | | | $140,341 | | C. Gill, Jr. | | $0 | | | $39,157 | | | $57,557 | | | $9,540 | | | $43,200 | | | $0 | | | $0 | | | $5,357 | | | $154,811 | | A. Bellemare | | $0 | | | $7,159 | | | $0 | | | $2,700 | | | $0 | | | $2,492,288 | | | $0 | | | $4,592 | | | $2,506,739 |
| Name | | Personal Use
of Corporate
Aircraft | (a) | | Leased
Vehicle
Payments | (b) | | Insurance
Premiums | (c) | | 401(k) Plan
Company
Contributions | (d) | | Company
Contributions
to Retirement
Plans | (e) | | Relocation
Benefits | (f) | | Financial
Planning | (g) | | International
Assignment | (h) | | Miscellaneous(i) | | Total | | G. Hayes | | $60,042 | | | $26,904 | | | $143,741 | | | $9,540 | | | $73,260 | | | $0 | | | $7,408 | | | $0 | | | $947 | | $321,842 | | A. Johri | | $0 | | | $18,832 | | | $115,880 | | | $24,036 | | | $79,800 | | | $0 | | | $15,474 | | | $0 | | | $5,334 | | $259,356 | | R. McDonough | | $0 | | | $30,438 | | | $74,879 | | | $0 | | | $0 | | | $31,500 | | | $0 | | | $0 | | | $82 | | $136,899 | | P. Delpech | | $0 | | | $38,948 | | | $16,958 | | | $0 | | | $138,227 | | | $13,170 | | | $0 | | | $254,222 | | | $82 | | $461,607 | | R. Leduc | | $0 | | | $25,617 | | | $0 | | | $24,115 | | | $57,038 | | | $0 | | | $0 | | | $0 | | | $5,334 | | $112,104 |
| | (a) | Incremental variable operating costs incurred for personal travel, which includes fuel (calculated on the basis of aircraft-specific average consumption rates and fleet average fuel costs), fleet average landing and handling fees, additional crew lodging and meal allowances, catering and hourly maintenance contract charges, when applicable. Because fleet-wide aircraft utilization is primarily for business purposes (i.e., approximately 99% in 2015)2016), capital and other fixed expenditures are not treated as variable operating costs relative to personal use. Mr. Hayes may use the Corporate aircraftThe amount shown includes $1,465 for uptravel to 50 hours per year. Personal use of the Corporate aircraft by Mr. Hayes aligns with our security policy, and the Committee believes that it optimizes the most efficient use of his time. No other executives are permitted to use the Corporate aircraft for personal travel.outside board meetings. | | | | | | | (b) | Annual costs associated with a leased vehicle paid by UTC on behalf of the executive. | | | | | | | (c) | Premium paid on behalf of the executive under the ELG life insurance program. Under this program, UTC pays the premiums on a permanent cash value life insurance contract owned by the executive. Life insurance benefits equal up to three times the executive’s actual or projected base salary at age 62. IfOnce vested (age 55 or older with three years of service as an ELG member), UTC funds the policy to maintain coverage following retirement. This benefit was eliminated for ELG members appointed after January 31, 2015.2015, including Mr. Leduc. The ELG life insurance benefit is a U.S.-based benefit for which Mr. Delpech is not eligible. The value shown for him reflects premiums paid for life and disability insurance in Belgium. | | | | | | | (d) | Dollar value of Company stock matching contributions under the UTC 401(k) Savings Plan. Employees hired on or after January 1, 2010, including Mr.Messrs. Johri receiveand Leduc, received an additional age-based Company automatic contribution to the UTC 401(k) Savings Plan in lieu of participation in the UTC Employee Retirement Plan. | | | | | | | (e) | Dollar value of Company contributions to the UTC Savings Restoration Plan (“SRP”) and the Company Automatic Contribution Excess Plan (“CACEP”). Under the SRP, participants are credited with a benefit equal to the UTC matching contribution that the executive did not receive under the UTC 401(k) Savings Plan due to Internal Revenue Code (“IRC”) limits. For executives hired on or after January 1, 2010, including Mr.Messrs. Johri and Leduc, the CACEP provides an additional age-based Company automatic contribution for compensation earned over IRC limits. Amounts shown in this column for Mr. Darnis include a SRP match make-up for 2015, credited to his UTC Deferred Compensation Plan account, as detailed in footnote (6) of the Nonqualified Deferred Compensation table on page 65. Details on theseour non-qualified deferred compensation plans, which include the SRP and CACEP, are also provided on pages 65 and 6668-69 of this Proxy Statement. Mr. Delpech does not participate in these U.S.-based deferred compensation plans. The value shown for him reflects premium payments to an individual retirement insurance contract maintained on his behalf in Belgium. | | | | | | | (f) | ELG cash severance payment (including interest earned during the payment deferral period at a rate of 3.5%)Payments associated with Messrs. McDonough and a $200,000,18-month consulting arrangement, which UTC entered into with Mr. Bellemare following his retirement on January 31, 2015. Mr. Bellemare’s consulting agreement assured post-employment availability to advise on certain matters related to the Company’s aerospace businesses.Delpech’s relocations. | | | | | | | (g) | Costs associated with Mr. Johri’s relocation include temporary living expenses for him and his family, home sale and purchase closing costs, shipment of personal property and moving-related tax assistance.a financial planning benefit available to ELG members. | | | | | | | (h) | Certain compensation elements for Mr. Delpech, who is based in Belgium, are provided in accordance with his local contract and international assignment package. Individual contracts for senior executives are customary in European countries where compensation practices differ from the U.S. The amount shown for Mr. Delpech includes the following items, as required by his contract: $123,458 for housing and utilities; $38,508 for a child education allowance; $63,312 for a driver; and $28,944 for tax planning services. | | | | | (i) | Costs associated with annual executive physicals and other incidental benefits. |
(7) | Includes a cash sign-on bonus | | | (6) | The increase in the present value of $665,000 madepension benefits during 2016 is mainly attributable to offset compensation forfeited from Mr. Johri’s former employer.Hayes becoming eligible to receive an unreduced retirement benefit at age 62 under UTC’s pension plans. | | | | (8) | Messrs. Bellemare, Darnis and Adams retired from the Company effective January 31, 2015, January 31, 2016 and February 29, 2016, respectively. | | | (9)(7) | Different assumptionsAll values shown for active and retired plan participants are required underMr. Delpech have been converted to U.S. dollars based on the non-qualified UTC Pension Preservation Plan. In this case, early retirement prioreuro to age 62 resulted in an increase in the estimated present valueU.S. dollar conversion rate of the accrued benefit.1.05356 as of December 31, 2016. |
58Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
COMPENSATION TABLES GRANTS OF PLAN-BASED AWARDS | | | Estimated Future Payouts under
Equity Incentive Plan Awards(2) | | All Other
Stock Awards:
Number of
Shares of | | | All Other
Option
Awards:
Number of
Securities
Underlying | | | Exercise or
Base Price of
Option Awards | | | Grant Date
Fair Value
of Stock
and Option | | | Grant Date(1) | | Threshold (#) | | Target (#) | | Maximum (#) | | Stock or Units (#) | | | Options (#) | (3) | | ($/Sh) | (4) | | Awards ($) | (5) | | G. Hayes | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | 19,750 | | 39,500 | | 79,000 | | – | | | – | | | – | | | $4,752,443 | | | 1/2/2015 | | – | | – | | – | | – | | | 165,500 | | | $115.04 | | | $3,280,210 | | | A. Johri | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | 4,850 | | 9,700 | | 19,400 | | – | | | – | | | – | | | $1,167,056 | | | 1/2/2015 | | – | | – | | – | | – | | | 40,500 | | | $115.04 | | | $802,710 | | | 1/2/2015 | | – | | – | | – | | – | | | 134,600 | (7) | | $115.04 | | | $2,667,772 | | | 1/2/2015 | | – | | – | | – | | 12,200 | (6) | | – | | | – | | | $1,403,488 | | | 1/2/2015 | | – | | – | | – | | 36,510 | (7) | | – | | | – | | | $4,200,110 | | | G. Darnis | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | 11,000 | | 22,000 | | 44,000 | | – | | | – | | | – | | | $2,646,930 | | | 1/2/2015 | | – | | – | | – | | – | | | 92,000 | | | $115.04 | | | $1,823,440 | | | P. Adams | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | 6,150 | | 12,300 | | 24,600 | | – | | | – | | | – | | | $1,479,875 | | | 1/2/2015 | | – | | – | | – | | – | | | 51,500 | | | $115.04 | | | $1,020,730 | | | 12/1/2015 | | – | | – | | – | | 10,350 | (8) | | – | | | – | | | $1,000,845 | | | C. Gill, Jr. | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | 7,700 | | 15,400 | | 30,800 | | – | | | – | | | – | | | $1,852,851 | | | 1/2/2015 | | – | | – | | – | | – | | | 64,500 | | | $115.04 | | | $1,278,390 | | | A. Bellemare | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | 7,700 | | 15,400 | | 30,800 | | – | | | – | | | – | | | $1,852,851 | | | 1/2/2015 | | – | | – | | – | | – | | | 64,500 | | | $115.04 | | | $1,278,390 | |
| | |
Estimated Future Payouts under
Equity Incentive Plan Awards(2) | | All Other
Stock Awards:
Number of
Shares of
Stock or Units (#) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options (#) | (3) | | Exercise or
Base Price of
Option Awards
($/Sh) | (4) | | Grant Date
Fair Value
of Stock
and Option
Awards ($) | (5) | | Grant Date(1) | | Threshold (#) | | Target (#) | | Maximum (#) | | | | | | G. Hayes | | | | | | | | | | | | | | | | 1/4/2016 | | 22,525 | | 53,000 | | 106,000 | | – | | – | | | – | | | $4,960,217 | | | 1/4/2016 | | – | | – | | – | | – | | 264,000 | | | $95.57 | | | $3,706,560 | | | | | | | | | | | | | | | | | | | | | A. Johri | | | | | | | | | | | | | | | | | | 1/4/2016 | | 7,310 | | 17,200 | | 34,400 | | – | | – | | | – | | | $1,609,731 | | | 1/4/2016 | | – | | – | | – | | – | | 86,000 | | | $95.57 | | | $1,207,440 | | | | | | | | | | | | | | | | | | | | R. McDonough | | | | | | | | | | | | | | | | | 1/4/2016 | | 11,220 | | 26,400 | | 52,800 | | – | | – | | | – | | | $2,470,750 | | | 1/4/2016 | | – | | – | | – | | – | | 132,000 | | | $95.57 | | | $1,853,280 | | | | | | | | | | | | | | | | | | | | P. Delpech | | | | | | | | | | | | | | | | | 1/4/2016 | | 11,220 | | 26,400 | | 52,800 | | – | | – | | | – | | | $2,470,750 | | | 1/4/2016 | | – | | – | | – | | – | | 132,000 | | | $95.57 | | | $1,853,280 | | | | | | | | | | | | | | | | | | | | R. Leduc | | | | | | | | | | | | | | | | | 1/15/2016 | | 7,480 | | 17,600 | | 35,200 | | – | | – | | | – | | | $1,479,051 | | | 1/15/2016 | | – | | – | | – | | – | | 88,000 | | | $85.63 | | | $1,107,040 | | | 1/15/2016(6) | | – | | – | | – | | 15,770 | | – | | | – | | | $1,350,385 | |
| (1) | The Committee approves annual long-term incentive awards for the following year at its December meeting.meeting prior to the beginning of the year. The Committee specifies the first business day of the calendar year as the award grant date to coincide with calendar year-basedyear based performance measurement periods. The grant date of Mr. Leduc’s annual LTI award was January 15, 2016, the date he was rehired by UTC. | | | | | (2) | Number of PSUs granted under the LTIP, which are subject to vesting based on performance relative to three-year performance targets.EPS growth and ROIC targets (each weighted at 35%) and a cumulative three-year relative TSR target (weighted at 30%). Each PSU corresponds to one share of Common Stock. 50%Vesting ranges from a threshold payout of the PSU award vests subject42.5% of target to a three-year EPS growth target and 50% vests subject tomaximum payout of 200%. Below threshold-level performance will result in a cumulative three-year relative TSRpayout of 0% of target. The vesting range is between 50% and 200% of the target vesting level. Unvested PSUs do not receiveaccrue dividend equivalent payments.equivalents. Vested PSUs are settled in unrestricted shares of Common Stock at the end of the performance period following the Committee’s review and approval of performance achievement levels. PSUs held for at least one year as of the date of qualifying retirement or upon disability remain eligible to vest at the end of the three-year performance period. Post-employment service as a consultant is recognized under the LTIP for these purposes. Upon death or a change-in-control, PSUs will vest at target-level performance. PSUs are otherwise forfeited upon termination of employment before the end of the performance period. | | | | | (3) | Number of SARs (or stock options in the case of Mr. Delpech) granted on January 2, 2015during 2016 that become exercisable after three years of service from the grant date, or earlier in the case of qualifying retirement (provided the SARsawards have been held for at least one year from the grant date), death or a change-in-control. Post-employment service is recognized in the case of disabilitySARs and as a consultant under the LTIP for these purposes. SARsstock options are otherwise forfeited upon termination of employment before the end of the vesting period. | | | | | (4) | The exerciseExercise price isof SAR and stock option awards are equal to the NYSE closing price of ourUTC Common Stock on the grant date. | | | | | (5) | Grant date fair value of equity awards granted in 20152016, with vesting assumed at 100% of target for performance-based awards. Awards are calculated in accordance with the Compensation-Stock Compensation Topic of the FASB ASC, but excluding the effect of estimated forfeitures. On December 14, 2016, the Committee approved a change to the TSR portion of the 2016 PSU award, reducing the threshold-level payout from 50% to 25% of target if UTC’s TSR performance equals the 25thpercentile rank relative to the S&P 500 over the three-year performance period. | | | | | (6) | ELG RSU award granted to Mr. JohriLeduc upon his appointment to the ELG. This award will vest in the event of a mutually agreeable separation following three years of ELG service, upon death or a change-in-control. ELG RSUs accumulate dividend equivalents that are reinvested as additional RSUs during the vesting period. Vested ELG RSUs are settled in shares of Common Stock. | | | (7) | Consists of supplemental RSU and SAR awards granted to Mr. Johri to offset compensation he forfeited from his former employer. RSU awards accumulate dividend equivalents during the vesting period that are reinvested as additional RSUs. These awards vest three years from the grant date. | | | (8) | Special RSU award granted to Mr. Adams in recognition of the certification by the FAA and the EASA of the PurePower PW1000G engine with Geared Turbofan technology. This award will vest on February 28, 2017, contingent on Mr. Adams’ consulting agreement remaining in effect through this date. Special RSU awards accumulate dividend equivalents during the vesting period that are reinvested as additional RSUs. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 59 |
COMPENSATION TABLES
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | | Option Awards | | Stock Awards | | | Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | | | Option
Exercise
Price ($) | (1) | | Option
Expiration
Date | | Number of
Shares or
Units of Stock
That Have Not
Vested (#) | | | Market Value
of Shares or
Units of Stock
That Have Not
Vested ($) | (2) | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#) | (3) | | Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($) | (4) | | G. Hayes | | – | | 165,500 | (5) | | – | | | $115.04 | | | 1/1/2025 | | – | | | – | | | 39,500 | | | $3,794,765 | (8) | | | | – | | 71,500 | (6) | | – | | | $112.49 | | | 1/1/2024 | | – | | | – | | | 18,600 | | | $1,786,902 | (9) | | | | – | | 107,000 | (7) | | – | | | $84.00 | | | 1/1/2023 | | – | | | – | | | 11,528 | | | $1,107,495 | (10) | | | | 122,000 | | – | | | – | | | $74.66 | | | 1/2/2022 | | – | | | – | | | – | | | – | | | | | 103,000 | | – | | | – | | | $78.99 | | | 1/2/2021 | | – | | | – | | | – | | | – | | | | | 86,000 | | – | | | – | | | $71.63 | | | 1/3/2020 | | – | | | – | | | – | | | – | | | | | 90,000 | | – | | | – | | | $70.81 | | | 4/8/2018 | | – | | | – | | | – | | | – | | | | | 54,500 | | – | | | – | | | $75.21 | | | 1/1/2018 | | – | | | – | | | – | | | – | | | | | 55,500 | | – | | | – | | | $62.81 | | | 1/2/2017 | | – | | | – | | | – | | | – | | | A. Johri | | – | | 134,600 | (11) | | – | | | $115.04 | | | 1/1/2025 | | 37,421 | (11) | | $3,595,035 | | | – | | | – | | | | | – | | 40,500 | (5) | | – | | | $115.04 | | | 1/1/2025 | | – | | | – | | | 9,700 | | | $931,879 | (8) | | | | – | | – | | | – | | | – | | | – | | 12,504 | (12) | | $1,201,259 | | | – | | | – | | | | | 30,500 | | – | | | – | | | $74.66 | | | 1/2/2022 | | – | | | – | | | – | | | – | | | | | 22,500 | | – | | | – | | | $78.99 | | | 1/2/2021 | | – | | | – | | | – | | | – | | | | | 14,500 | | – | | | – | | | $71.63 | | | 1/3/2020 | | – | | | – | | | – | | | – | | | | | 21,900 | | – | | | – | | | $54.95 | | | 1/1/2019 | | – | | | – | | | – | | | – | | | | | 13,600 | | – | | | – | | | $75.21 | | | 1/1/2018 | | – | | | – | | | – | | | – | | | G. Darnis | | – | | 92,000 | (5) | | – | | | $115.04 | | | 1/1/2025 | | – | | | – | | | 22,000 | | | $2,113,540 | (8) | | | | – | | 69,000 | (6) | | – | | | $112.49 | | | 1/1/2024 | | – | | | – | | | 18,000 | | | $1,729,260 | (9) | | | | 65,608 | (13) | – | | | 69,500 | (13) | | $112.49 | | | 1/1/2024 | | – | | | – | | | – | | | – | | | | | – | | 105,500 | (7) | | – | | | $84.00 | | | 1/1/2023 | | – | | | – | | | 11,396 | | | $1,094,814 | (10) | | | | 114,500 | | – | | | – | | | $74.66 | | | 1/2/2022 | | – | | | – | | | – | | | – | | | | | 88,500 | | – | | | – | | | $78.99 | | | 1/2/2021 | | – | | | – | | | – | | | – | | | | | 85,500 | | – | | | – | | | $71.63 | | | 1/3/2020 | | – | | | – | | | – | | | – | | | | | 142,500 | | – | | | – | | | $54.95 | | | 1/1/2019 | | – | | | – | | | – | | | – | | | | | 120,000 | | – | | | – | | | $70.81 | | | 4/8/2018 | | – | | | – | | | – | | | – | | | | | 95,000 | | – | | | – | | | $75.21 | | | 1/1/2018 | | – | | | – | | | – | | | – | | | | | 102,000 | | – | | | – | | | $62.81 | | | 1/2/2017 | | – | | | – | | | – | | | – | |
6062 | |
COMPENSATION TABLES OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | | | Option Awards | | Stock Awards | | | Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | | Option
Exercise
Price ($)(1) | | Option
Expiration
Date | | Number of
Shares or
Units of Stock
That Have Not
Vested (#) | | Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)(2) | | Equity
Incentive
Plan Awards: Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)(3) | | Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($) | (4) | | G. Hayes | | – | | 264,000(5) | | – | | $ 95.57 | | 1/3/2026 | | – | | – | | 106,000 | | $ 11,619,720 | (8) | | | | – | | 165,500(6) | | – | | $ 115.04 | | 1/1/2025 | | – | | – | | 19,750 | | $ 2,164,995 | (9) | | | | – | | 71,500(7) | | – | | $ 112.49 | | 1/1/2024 | | – | | – | | – | | – | (10) | | | | 107,000 | | – | | – | | $ 84.00 | | 1/1/2023 | | – | | – | | – | | – | | | | | 122,000 | | – | | – | | $ 74.66 | | 1/2/2022 | | – | | – | | – | | – | | | | | 103,000 | | – | | – | | $ 78.99 | | 1/2/2021 | | – | | – | | – | | – | | | | | 86,000 | | – | | – | | $ 71.63 | | 1/3/2020 | | – | | – | | – | | – | | | | | 54,500 | | – | | – | | $ 75.21 | | 1/1/2018 | | – | | – | | – | | – | | | | | | | | | | | | | | | | | | | | | | | | A. Johri | | – | | 86,000(5) | | – | | $ 95.57 | | 1/3/2026 | | – | | – | | 34,400 | | $ 3,770,928 | (8) | | | | – | | 134,600(11) | | – | | $ 115.04 | | 1/1/2025 | | 38,382(11) | | $ 4,207,435 | | – | | – | | | | | – | | 40,500(6) | | – | | $ 115.04 | | 1/1/2025 | | – | | – | | 4,850 | | $ 531,657 | (9) | | | | – | | – | | – | | – | | – | | 12,825(12) | | $ 1,405,877 | | – | | – | | | | | 30,500 | | – | | – | | $ 74.66 | | 1/2/2022 | | – | | – | | – | | – | | | | | 22,500 | | – | | – | | $ 78.99 | | 1/2/2021 | | – | | – | | – | | – | | | | | 14,500 | | – | | – | | $ 71.63 | | 1/3/2020 | | – | | – | | – | | – | | | | | 21,900 | | – | | – | | $ 54.95 | | 1/1/2019 | | – | | – | | – | | – | | | | | 6,800 | | – | | – | | $ 75.21 | | 1/1/2018 | | – | | – | | – | | – | | | | | | | | | | | | | | | | | | | | | | | | R. McDonough | | – | | 132,000(5) | | – | | $ 95.57 | | 1/3/2026 | | – | | – | | 52,800 | | $ 5,787,936 | (8) | | | | – | | 50,500(6) | | – | | $ 115.04 | | 1/1/2025 | | – | | – | | 6,050 | | $ 663,201 | (9) | | | | – | | 35,000(7) | | – | | $ 112.49 | | 1/1/2024 | | – | | – | | – | | – | (10) | | | | 32,804 | | – | | 34,750(13) | | $ 112.49 | | 1/1/2024 | | – | | – | | – | | – | | | | | – | | – | | – | | – | | – | | 11,993(14) | | $ 1,314,673 | | – | | – | | | | | 38,000 | | – | | – | | $ 84.00 | | 1/1/2023 | | – | | – | | – | | – | | | | | 28,000 | | – | | – | | $ 74.66 | | 1/2/2022 | | – | | – | | – | | – | | | | | – | | – | | – | | – | | – | | 12,825(12) | | $ 1,405,877 | | – | | – | | | | | 20,900 | | – | | – | | $ 78.99 | | 1/2/2021 | | – | | – | | – | | – | | | | | 18,900 | | – | | – | | $ 71.63 | | 1/3/2020 | | – | | – | | – | | – | | | | | 20,000 | | – | | – | | $ 54.95 | | 1/1/2019 | | – | | – | | – | | – | |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 63 |
COMPENSATION TABLES OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (CONTINUED) | | | Option Awards | | Stock Awards | | Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | | | Option
Exercise
Price ($) | (1) | | Option
Expiration
Date | | Number of
Shares or
Units of Stock
That Have Not
Vested (#) | | | Market Value
of Shares or
Units of Stock
That Have Not
Vested ($) | (2) | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#) | (3) | | Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($) | (4) | | P. Adams | | – | | – | | | – | | | – | | | – | | 10,350 | (15) | | $994,325 | | | – | | | – | | | | | – | | 51,500 | (5) | | – | | | $115.04 | | | 1/1/2025 | | – | | | – | | | 12,300 | | | $1,181,661 | (8) | | | | – | | 33,500 | (6) | | – | | | $112.49 | | | 1/1/2024 | | – | | | – | | | 8,700 | | | $835,809 | (9) | | | | – | | 33,000 | (7) | | – | | | $84.00 | | | 1/1/2023 | | – | | | – | | | 3,520 | | | $338,166 | (10) | | | | 37,946 | | – | | | 38,720 | (14) | | $79.06 | | | 10/31/2022 | | – | | | – | | | – | | | – | | | | | 25,500 | | – | | | – | | | $74.66 | | | 1/2/2022 | | – | | | – | | | – | | | – | | | | | 18,500 | | – | | | – | | | $78.99 | | | 1/2/2021 | | – | | | – | | | – | | | – | | | | | 16,000 | | – | | | – | | | $71.63 | | | 1/3/2020 | | – | | | – | | | – | | | – | | | | | – | | – | | | – | | | – | | | – | | 12,926 | (12) | | $1,241,801 | | | – | | | – | | | | | 22,000 | | – | | | – | | | $54.95 | | | 1/1/2019 | | – | | | – | | | – | | | – | | | | | 11,300 | | – | | | – | | | $75.21 | | | 1/1/2018 | | – | | | – | | | – | | | – | | | | | 11,400 | | – | | | – | | | $62.81 | | | 1/2/2017 | | – | | | – | | | – | | | – | | | C. Gill, Jr. | | – | | 64,500 | (5) | | – | | | $115.04 | | | 1/1/2025 | | – | | | – | | | 15,400 | | | $1,479,478 | (8) | | | | – | | 50,500 | (6) | | – | | | $112.49 | | | 1/1/2024 | | – | | | – | | | 13,200 | | | $1,268,124 | (9) | | | | – | | 73,000 | (7) | | – | | | $84.00 | | | 1/1/2023 | | – | | | – | | | 7,876 | | | $756,647 | (10) | | | | 75,500 | | – | | | – | | | $74.66 | | | 1/2/2022 | | – | | | – | | | – | | | – | | | | | 66,500 | | – | | | – | | | $78.99 | | | 1/2/2021 | | – | | | – | | | – | | | – | | | | | 60,500 | | – | | | – | | | $71.63 | | | 1/3/2020 | | – | | | – | | | – | | | – | | | | | 74,500 | | – | | | – | | | $54.95 | | | 1/1/2019 | | – | | | – | | | – | | | – | | | | | 90,000 | | – | | | – | | | $70.81 | | | 4/8/2018 | | – | | | – | | | – | | | – | | | | | 43,500 | | – | | | – | | | $75.21 | | | 1/1/2018 | | – | | | – | | | – | | | – | | | | | – | | – | | | – | | | – | | | – | | 10,370 | (12) | | $996,246 | | | – | | | – | | | | | 23,300 | | – | | | – | | | $62.81 | | | 1/2/2017 | | – | | | – | | | – | | | – | | | A. Bellemare | | – | | 64,500 | (5) | | – | | | $115.04 | | | 1/1/2025 | | – | | | – | | | 15,400 | | | $1,479,478 | (8) | | | | – | | 69,000 | (6) | | – | | | $112.49 | | | 1/1/2024 | | – | | | – | | | 18,000 | | | $1,729,260 | (9) | | | | – | | 100,500 | (7) | | – | | | $84.00 | | | 1/1/2023 | | – | | | – | | | 10,868 | | | $1,044,089 | (10) | | | | 99,906 | | – | | | – | | | $74.79 | | | 7/31/2022 | | – | | | – | | | – | | | – | | | | | 59,000 | | – | | | – | | | $78.99 | | | 1/2/2021 | | – | | | – | | | – | | | – | |
| | | Option Awards | | Stock Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | | | Option
Exercise
Price($) | (1) | | Option
Expiration
Date | | | Number of
Shares or
Units of Stock
That Have Not
Vested (#) | | | Market Value
of Shares or
Units of Stock
That Have Not
Vested ($) | (2) | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#) | (3) | | Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($) | (4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | P. Delpech | | – | | | 132,000 | (5) | | – | | | $95.57 | | | 1/3/2026 | | | – | | | – | | | 52,800 | | | $ 5,787,936 | (8) | | | | – | | | 50,500 | (6) | | – | | | $115.04 | | | 1/1/2025 | | | – | | | – | | | 6,050 | | | $ 663,201 | (9) | | | | – | | | 35,000 | (7) | | – | | | $112.49 | | | 1/1/2024 | | | – | | | – | | | – | | | – | (10) | | | | 32,804 | | | – | | | 34,750 | (13) | | $112.49 | | | 1/1/2024 | | | – | | | – | | | – | | | – | | | | | – | | | – | | | – | | | – | | | – | | | 21,451 | (12) | | $2,351,459 | | | – | | | – | | | | | – | | | – | | | – | | | – | | | – | | | 11,444 | (14) | | $1,254,491 | | | – | | | – | | | | | 25,500 | | | – | | | – | | | $84.00 | | | 1/1/2023 | | | – | | | – | | | – | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | R. Leduc | | – | | | 88,000 | (5) | | – | | | $85.63 | | | 1/14/2026 | | | 16,175 | (12) | | $1,773,104 | | | 35,200 | | | $ 3,858,624 | (8) | | | | – | | | 54,200 | (15) | | – | | | $115.92 | | | 3/31/2025 | | | 4,516 | (15) | | $495,044 | | | – | | | – | | | | | 23,000 | | | – | | | – | | | $84.00 | | | 1/1/2023 | | | – | | | – | | | – | | | – | | | | | 25,500 | | | – | | | – | | | $74.66 | | | 1/2/2022 | | | – | | | – | | | – | | | – | | | | | 26,000 | | | – | | | – | | | $78.99 | | | 1/2/2021 | | | – | | | – | | | – | | | – | |
| (1) | The exercise price of each SAR (or stock option in the case of Mr. Delpech) is equal to the NYSE closing price of ourUTC Common Stock on the grant date. | | | | | (2) | Calculated by multiplying the number of unvested RSUs by $96.07,$109.62, the NYSE closing price of ourUTC Common Stock on December 31, 2015.the last trading day of 2016. | | | | | (3) | The number of shares shown for PSUs granted in 20142016 and 2015 assume target-level TSRmaximum- and EPS performance; actualthreshold-level performance, respectively, based on vesting estimates as of December 31, 2016. Actual payouts for these PSUs will be based on actual performance at the end of the three-year performance periods. The number of sharesNo value is shown for PSUs grantedthe 2014 PSU awards because Company performance was below threshold resulting in 2013 reflect actual performance.0% vesting. | | | | | (4) | Calculated by multiplying the number of unvested 20142015 and 2015 PSUs and vested 20132016 PSUs by $96.07,$109.62, the NYSE closing price of ourUTC Common Stock on December 31, 2015.the last trading day of 2016. No value is shown for the 2014 PSU awards because Company performance was below threshold resulting in 0% vesting. | | | | | (5) | SARs (or stock options in the case of Mr. Delpech) scheduled to vest on January 2, 2018,4, 2019 (and for Mr. Leduc on January 15, 2019), subject to the executive’s continued employment, except in the event of death, change-in-control or qualifying retirement occurring at least one year from the date of grant and for Messrs. Bellemare, Darnis and Adams on the expiration of their post-employment consulting relationships.grant. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 61 |
COMPENSATION TABLES
| (6) | SARs (or stock options in the case of Mr. Delpech) scheduled to vest on January 2, 2017,2018, subject to the executive’s continued employment, except in the event of death, change-in-control or qualifying retirement occurring at least one year from the date of grant. | | | | | (7) | SARs (or stock options in the case of Mr. Delpech) that vested on January 2, 2016.2017. | | | | | (8) | PSUs that are subject to performance-based vesting contingent on Company performance measured relative to targets measured over a three-year period ending on December 31, 2018 and the executive’s continued employment (except in cases of qualifying retirement, disability, death or change-in-control). Amounts shown reflect maximum-level performance, based on vesting estimates as of December 31, 2016. | | | | (9) | PSUs that are subject to performance-based vesting contingent on Company performance relative to targets measured over a three-year period ending on December 31, 2017 and the executive’s continued employment (except in cases of qualifying retirement, disability, death change-in-control or post-employment consulting relationships)change-in-control). | | | (9) | PSUs that are subject to performance-based Amounts shown reflect threshold-level performance, based on vesting contingent on Company performance measured relative to targets over a three-year period ending onestimates as of December 31, 2016, and the executive’s continued employment (except in cases of qualifying retirement, disability, death, change-in-control or post-employment consulting relationships).2016. | | | | | (10) | PSUs for which the service condition was satisfied on January 2, 2016. The number of PSUs shown reflects the Committee’s approval of 44%2017. Awards did not vest due to below threshold-level performance achieved by the Company, relative to pre-established targets over the three-year performance period, as discussed on page 41.44. | | | | | (11) | RSUSAR and SARRSU awards granted to Mr. Johri to offset the value of compensation forfeited compensationupon departure from his former employer. Awards vest three years from the grant date, subject to continued service with the Company, upon death or a change-in-control. These RSU awards accumulate dividend equivalents during the vesting period that are reinvested asin additional RSUs. These awards vest three years from the grant date. | | | | | (12) | Number of ELG RSUs granted to Messrs. Johri, Adams and Gill upon appointment to the ELG. Mr. Johri’s award willAwards vest in the event of a mutually agreeable separation following three years of ELG service.service, upon death or a change-in-control. For Mr. Gill’s award will vest upon aMcDonough, mutually agreeable separation must also occur on or after age 62. Mr. Adams did not vest in his award upon termination of employment.62. ELG RSUs accumulate dividend equivalents that are reinvested asin additional RSUs during the vesting period. | | | | | (13) | SARs granted on January 2, 2014 to Mr. Darnis, ofMessrs. McDonough and Delpech which 50% vested at 94.4% basedvest contingent on performance through December 31, 20152017, relative to pre-established performance targets related to our commercial businesses. The remaining 50% of this award was cancelledbusinesses or upon Mr. Darnis’ retirement.death or a change-in-control. |
| 64 | |
COMPENSATION TABLES | (14) | SARs granted on November 1, 2012 to Mr. Adams which will vest based on performance through December 31, 2016 relative to pre-established performance targets related to our aerospace businesses and continuation of Mr. Adams’ consulting relationship through this date. | | | (15) | RSUsRetention RSU awards granted to Mr. Adams in recognition for the FAAMessrs. McDonough and EASA certification of the GTF engine. RSUs willDelpech which vest on February 28,May 1, 2017 and July 1, 2017, respectively, contingent on continued service with the continuation of Mr. Adams’ consulting relationshipCompany through this date. RSUsthe vesting date, upon death or a change-in-control. These RSU awards accumulate dividend equivalents during the vesting period that are reinvested asin additional RSUs. | | | | (15) | SAR and RSU awards granted to Mr. Leduc upon rehire, which will vest contingent on continued service with the Company through April 1, 2018, upon death or a change-in-control. These RSU awards accumulate dividend equivalents during the vesting period that are reinvested in additional RSUs. |
OPTION EXERCISES AND STOCK VESTED | | | Option Awards | | Stock Awards | | Name | | Number of Shares
Acquired on Exercise (#) | (1) | | Value Realized
on Exercise ($) | (2) | | Number of Shares
Acquired on Vesting (#) | (3) | | Value Realized
on Vesting ($) | (4) | | G. Hayes | | – | | | – | | | 29,070 | | | $3,468,632 | | | A. Johri | | – | | | – | | | 7,290 | | | $869,843 | | | G. Darnis | | 301,500 | | | $19,184,828 | | | 27,270 | (5) | | $3,253,856 | (5) | | P. Adams | | – | | | – | | | 6,120 | | | $730,238 | | | C. Gill, Jr. | | – | | | – | | | 18,000 | | | $2,147,760 | | | A. Bellemare | | 361,000 | | | $19,151,496 | | | 27,270 | | | $3,253,856 | |
| | | Option Awards | | Stock Awards | | Name | | Number of Shares
Acquired on Exercise (#) | (1) | | Value Realized
on Exercise ($) | (2) | | Number of Shares
Acquired on Vesting (#) | (3) | | Value Realized
on Vesting ($) | (4) | | G. Hayes | | 145,500 | | | $5,610,687 | | | 11,528 | | | $1,002,475 | | | A. Johri | | 6,800 | | | $229,923 | | | – | | | – | | | R. McDonough | | – | | | – | | | 4,092 | | | $355,840 | | | P. Delpech | | 40,800 | | | $1,326,282 | | | 2,728 | | | $237,227 | | | R. Leduc | | – | | | – | | | 2,464 | | | $214,269 | |
| (1) | SAR awardsSARs (or stock options in the case of Mr. Delpech) exercised in 2015.2016. | | | | | (2) | Calculated by multiplying the number of shares acquired upon exercise by the difference between the exercise price and the market price of ourUTC Common Stock on the exercise date.date and the exercise price of the award. | | | | | (3) | PSUs that converted to shares of Common Stock on a one-for-one basis upon vesting in 2015.2016. | | | | | (4) | Calculated by multiplying the number of vested PSUs by the market price of ourUTC Common Stock on the vesting date. | | | (5) | Mr. Darnis elected to defer the receipt of his vested 2012 PSU under the PSU Deferral Plan, as shown on page 65. |
62Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
COMPENSATION TABLES PENSION BENEFITS | | | | | Number of | | | Present Value of | | | Payments | | | | | | | Years of Credited | | | Accumulated | | | During Last | | | Name | | Plan Name | | Service (#) | | | Benefit ($) | (1) | | Fiscal Year ($) | | | G. Hayes | | UTC Employee Retirement Plan | | 26 | | | $996,843 | | | – | | | | | UTC Pension Preservation Plan | | 26 | | | $6,416,128 | | | – | | | | | Total | | | | | $7,412,971 | | | – | | | A. Johri(2) | | UTC Employee Retirement Plan | | 15 | | | $709,323 | | | – | | | | | UTC Pension Preservation Plan | | 15 | | | $1,450,976 | | | – | | | | | Total | | | | | $2,160,299 | | | – | | | G. Darnis | | UTC Employee Retirement Plan | | 32 | | | $1,372,319 | | | – | | | | | UTC Pension Preservation Plan | | 32 | | | $18,162,551 | | | – | | | | | Total | | | | | $19,534,870 | | | – | | | P. Adams | | UTC Employee Retirement Plan | | 16 | | | $752,903 | | | – | | | | | UTC Pension Preservation Plan | | 16 | | | $2,388,607 | | | – | | | | | Total | | | | | $3,141,510 | | | – | | | C. Gill, Jr. | | UTC Employee Retirement Plan | | 21 | | | $868,591 | | | – | | | | | UTC Pension Preservation Plan | | 21 | | | $3,796,841 | | | – | | | | | Total | | | | | $4,665,432 | | | – | | | A. Bellemare | | UTC Employee Retirement Plan | | 8 | | | $405,867 | | | – | | | | | UTC Pension Preservation Plan | | 8 | | | $3,287,423 | | | – | | | | | Pratt & Whitney Canada Salaried and Executive Employee Pension Plans | | 10 | | | – | | | $3,155,901 | (3) | | | | Total | | | | | $3,693,290 | | | $3,155,901 | |
| Name | | Plan Name | | Number of
Years of Credited
Service (#) | | | Present Value of
Accumulated
Benefit ($) | (1) | | Payments
During Last
Fiscal Year ($) | | | G. Hayes | | UTC Employee Retirement Plan | | 27 | | | $1,331,379 | | | – | | | | UTC Pension Preservation Plan | | 27 | | | $8,464,537 | | | – | | | | Total | | | | | $9,795,916 | | | – | | | A. Johri(2) | | UTC Employee Retirement Plan | | 15 | | | $770,675 | | | – | | | | UTC Pension Preservation Plan | | 15 | | | $1,541,464 | | | – | | | | Total | | | | | $2,312,139 | | | – | | | R. McDonough | | UTC Employee Retirement Plan | | 9 | | | $229,958 | | | – | | | | UTC Pension Preservation Plan | | 9 | | | $627,970 | | | – | | | | Total | | | | | $857,928 | | | – | | | P. Delpech(3) | | – | | – | | | – | | | – | | | R. Leduc(2) | | UTC Employee Retirement Plan | | 36 | | | $1,763,890 | | | $103,158 | | | | UTC Pension Preservation Plan | | 36 | | | $3,767,162 | | | $459,544 | | | | Total | | | | | $5,531,052 | | | $562,702 | |
| (1) | The presentPresent value calculationof the accumulated benefit is based oncalculated using a 4.28%4.01% discount rate, a 4.00% long-term interest rate for lump-sum determinations under the UTC Pension Preservation Plan (“PPP”), and other assumptions for U.S. plans, as described in the pension expense assumptions of Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 20152016 Form 10-K. Amounts are calculated based on an assumed benefit commencement date at the earliest date the participant can retire without a reduction of benefits due to age or the actual retirement date, if known. The assumedUnless the NEOs elected another form of benefit payment, is:the amounts shown assume the following form of payment: (i) a monthly life annuity for benefits earned under the Final Average Earningsfinal average earnings (“FAE”) formula inof the UTC Employee Retirement Plan; (ii) a lump-sum payment for benefits earned under the cash balance benefit underformula of the UTC Employee Retirement Plan; and (iii) a lump-sum payment for benefits accrued under the PPP (except for the FAE benefit for Mr. Adams, which is assumed to be paid as a monthly annuity as per his election, and the cash balance benefit for Mr. Bellemare, which is assumed to be paid as a 9-year installment benefit, as per his election).PPP. | | | | | (2) | Mr.Messrs. Johri wasand Leduc were first employed by UTC in November 1986 and June 1978, respectively. Both accrued pension benefits under the final average earningsFAE formula of the UTC Employee Retirement Plan and the UTC Pension Preservation PlanPPP until hethey separated from service in April 2013. When re-employed on January 1, 2015,UTC service. Mr. Leduc was eligible for early retirement upon separation, and therefore, began receiving benefit payments under both plans which continue to be made. Mr. Johri was not eligible for early retirement upon his separation and must wait until subsequent separation of employment to resume participationcommence his previously accrued benefit. Upon re-employment, Messrs. Johri and Leduc were no longer eligible to accrue additional benefits in UTC’s pension plans and therefore, accrues no cash balance benefit under these plans. Instead, Mr. Johri is providedinstead receive age-based Company automatic contributions to histheir UTC 401(k) Savings Plan and Company Automatic Contribution Excess Plan (“CACEP”) accounts, asaccounts. These plans are described more fullyin detail on page 65.45. | | | | | (3) | Lump-sum distributionMr. Delpech does not participate in Company-funded, U.S.-based pension benefit plans. For more details on Mr. Delpech’s Company-funded Belgian retirement insurance contract, refer to footnote (5)(e) of accrued benefits under the Pratt & Whitney Canada Salaried and Executive Employee Pension Plans. Mr. Bellemare received a distributionSummary Compensation Table on page 61. As of thisDecember 31, 2016, the accrued benefit as a result of hison Mr. Delpech’s retirement from UTC on January 31, 2015.insurance contract was $423,035. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 63
|
COMPENSATION TABLES
UTC Employee Retirement Plan and UTC Pension Preservation Plan EmployeesSalaried employees hired before January 1, 2010 are eligible to participate in the UTC Employee Retirement Plan and the UTC Pension Preservation Plan (“PPP”).
Plan Description.The UTC Employee Retirement Plan is a tax-qualified plan subject to Internal Revenue Code provisions that, as of December 31, 2015,2016, limit recognized annual compensation to $265,000 and annual retirement benefits to $210,000. The PPP is an unfunded, non-qualified retirement plan utilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. The PPP provides benefits not accrued under the qualified plan due to the Internal Revenue Code limitations on annual compensation recognition and retirement benefit amounts.amounts referenced above. Changes from Final Average Earnings Formula to Cash BalancePension Benefit Formula.Through the end of 2014, both of these pension plans used a traditional final average earnings (“FAE”) retirement benefit formula.formula for salaried employees hired prior to July 1, 2002. Under this formula, the plans provideprovided an annual benefit equal to 2% of the executive’s earnings (defined below)on the following page) for each year | 66 | |
COMPENSATION TABLES of service up to a maximum of twenty years, plus 1% of earnings for each year of service thereafter, minus 1.5% of the executive’s Social Security benefits for each year of service (up to a maximum of 50% of the annual Social Security benefit). Earnings recognized under this formula consistconsisted of the highest average annual base salary and annual performance bonus received over any consecutive five calendar-year period ending on or before December 31, 2014. The FAE formula doesdid not recognize long-term incentive compensation earnings. Effective December 31, 2014, the FAE formula was replaced prospectively by a cash balance formula. The cash balance formula credits ana participant’s account with amounts that grow each month with two types of credits—pay credits and interest credits. Pay credits range from 3% to 8% of base salary and annual performance bonus, depending on the participant’s age. Interest credits are based on 30-year U.S. Treasury Bond yields and are subject to annual adjustments, but cannot fall below 3.8%. Employees hired on or after July 1, 2002, but prior to January 1, 2010, including Mr. McDonough, participate under this same cash balance formula for all of their years of service. Distribution Options.Lump-sum and annuity distribution options are available for amounts credited under these plans, except for benefits accrued under the FAE formula of the tax-qualified pension plan, which may only be distributed as an annuity.plans. Because amounts payable under the PPP are unfunded and unsecured, either a lump-sum or two- to ten-year annual installment distribution option isoptions (equivalent to the lump-sum) are available as an alternative to a monthly annuity. However, aA PPP lump-sum distribution is immediately and fully taxable as ordinary income. The PPP lump-sum calculation of the FAE portion of the benefit uses a discount rate equal to the Barclay’s Capital Municipal Bond Index averaged over five years (currently 2.316%2.354%). This non-taxable investment index is intended to yield an after-tax income stream on the net after-tax proceeds reinvested in tax free bonds that are comparable to that realized through a more tax efficient annuity distribution. The lump-sum value of the cash balance portion of the benefit will be equal to the accumulated cash balance account described above. Vesting and Retirement.Under both of these pension plans, vesting requires three years of service. The normal retirement age under both benefit formulas is 65. The FAE formula, however, also provides full retirement benefits at age 62 for a participant who retires with at least ten years of service. Early retirement benefits are also available under the FAE formula beginning at age 55 with at least ten years of service, reduced by 0.2% for each month by which the early retirement date precedes age 62. The value of the cash balance account is not impacted by an employee’s age at retirement. As of December 31, 2015, Mr.2016, Messrs. Hayes wasand Johri were eligible for early retirement under the only current NEO eligible to retire. Messrs. Bellemare, Darnis and Adams retired from UTC effective January 31, 2015, January 31, 2016 and February 29, 2016, respectively.FAE formula. Other Formulas Used.Benefits for Messrs. Darnis andMr. Hayes include amounts accrued under a different formulasformula used in the Carrier and Sundstrand predecessor pension plans respectively, that were merged into UTC’s retirementpension plans. The Pratt & Whitney Canada Salaried and Executive Employee Pension Plans utilize a FAE formula substantially similar to that used by the UTC Employee Retirement Plan and the PPP. 64Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
COMPENSATION TABLES NONQUALIFIED DEFERRED COMPENSATION | | | | | Executive | | | Registrant | | | Aggregate | | | Aggregate | | | Aggregate | | | | | | | Contributions in | | | Contributions in | | | Earnings in | | | Withdrawals/ | | | Balance at | | | Name | | Plan | | Last FY ($) | (1) | | Last FY ($) | (2) | | Last FY ($) | (3) | | Distributions ($) | | | Last FYE ($) | (4) | | G. Hayes | | UTC Deferred Compensation Plan | | $0 | | | $0 | | | -$83,260 | | | $0 | | | $1,155,105 | | | | | UTC Savings Restoration Plan | | $158,100 | | | $94,860 | | | -$59,527 | | | $0 | | | $1,201,449 | | | A. Johri | | UTC Savings Restoration Plan | | $0 | | | $0 | | | -$11,427 | | | -$23,345 | | | $168,461 | | | | | UTC Company Automatic Contribution Excess Plan | | $0 | | | $25,667 | | | $286 | | | $0 | | | $25,953 | | | G. Darnis | | UTC Deferred Compensation Plan | | $648,750 | | | $39,847 | (5) | | $83,462 | | | $0 | | | $3,793,706 | | | | | UTC Savings Restoration Plan | | $82,425 | | | $49,455 | | | -$34,491 | | | $0 | | | $776,083 | | | | | PSU Deferral Plan(6) | | $3,177,956 | | | $0 | | | -$1,012,972 | | | $0 | | | $5,347,662 | | | P. Adams | | UTC Savings Restoration Plan | | $59,590 | | | $35,754 | | | -$37,872 | | | $0 | | | $377,847 | | | C. Gill, Jr. | | UTC Savings Restoration Plan | | $72,000 | | | $43,200 | | | -$103,548 | | | $0 | | | $629,613 | | | A. Bellemare | | UTC Savings Restoration Plan | | $0 | | | $0 | | | -$37,858 | | | $0 | | | $723,999 | |
| Name | | Plan | | Executive
Contributions
in Last FY ($) | (1) | | Registrant
Contributions
in Last FY ($) | (2) | | Aggregate
Earnings in
Last FY ($) | (3) | | Aggregate
Withdrawals/
Distributions ($) | | | Aggregate
Balance at
Last FYE ($) | (4) | | | G. Hayes | | UTC Deferred Compensation Plan | | $0 | | | $0 | | | $137,821 | | | $0 | | | $1,292,926 | | | | | UTC Savings Restoration Plan | | $122,100 | | | $73,260 | | | $184,411 | | | $0 | | | $1,581,220 | | | | A. Johri | | UTC Deferred Compensation Plan | | $645,833 | | | $23,250 | (5) | | $47,536 | | | $0 | | | $716,619 | | | | | UTC Savings Restoration Plan | | $13,850 | | | $8,310 | | | $21,655 | | | ($21,368 | ) (6) | | $190,908 | | | | | | | | | | | | | | | | | | | | | | | | UTC Company Automatic Contribution Excess Plan | | $0 | | | $48,240 | | | $992 | | | $0 | | | $75,185 | | | | R. McDonough(7) | | UTC Deferred Compensation Plan | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | | | UTC Savings Restoration Plan | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | | P. Delpech(8) | | UTC Deferred Compensation Plan | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | | | UTC Savings Restoration Plan | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | | R. Leduc | | UTC Deferred Compensation Plan | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | | | UTC Savings Restoration Plan | | $35,475 | | | $21,285 | | | $15,039 | | | $0 | | | $158,383 | | | | | | | | | | | | | | | | | | | | | | | | Contribution Excess Plan UTC Company Automatic | | $0 | | | $35,753 | | | $797 | | | $0 | | | $44,581 | | |
| (1) | Amounts shown are included in the Salary and Bonus columns of the Summary Compensation Table. | | | | | (2) | Amounts shown are included in the All Other Compensation column of the Summary Compensation Table. | | | | | (3) | Returns on amounts credited to hypothetical investment accounts, as described under “Investment Options” on page 66.69. These returns do not constitute above-market earnings, except for $9,908$9,771 credited to Mr. Hayes under the frozen Sundstrand Corporation Deferred Compensation Plan. This amount is included in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the Summary Compensation Table. | | | | | (4) | The sum of contributions (both by the executive and UTC) and credited earnings on those deferrals, less withdrawals. Of these totals, the following amounts have been included in the Salary, Bonus and Stock Awards columns of the Summary Compensation Table in prior years: $916,957$1,262,199 (Mr. Hayes), $5,806,141 and $25,667 (Mr. Darnis), $66,975 (Mr. Gill) and $350,178 (Mr. Bellemare)Johri). | | | | | (5) | Consists of a Savings Restoration Plan match make-up for amounts inadvertently omitted from thisthe Plan. The corrected amount has been credited to Mr. Darnis’Johri’s UTC Deferred Compensation Plan account.Plan. | | | | | (6) | Mr. Darnis elected to deferJohri’s 2013 separation from service triggered distributions of his 2012 PSU vestingaccrued Savings Restoration Plan benefit in ten annual installments. Annual distributions of this previously accrued benefit will continue through 2023. Benefits Mr. Johri has earned under the PSU Deferral Plan as reportedsince he was rehired in 2015 are not included in these distributions. | | | | (7) | Mr. McDonough does not participate in the Option Exercises and Stock Vested table on page 62.UTC’s non-qualified deferred compensation plans. | | | | (8) | Mr. Delpech does not participate in any U.S.-based deferred compensation plans since he is based in Belgium. |
UTC Savings Restoration Plan (“SRP”) The UTC Savings Restoration Plan (“SRP”)SRP is a non-qualified, unfunded deferred compensation arrangement that offers participants the opportunity to defer up to 6% of pay (base salary andplus annual bonus) above the annual Internal Revenue Code compensation limit ($265,000 in 2015)2016) applicable to the tax-qualified UTC 401(k) Savings Plan. Using the UTC 401(k) Savings Plan’s matching contribution formula, the SRP credits matching contributions equal to 60% of the amount deferred by the executive in the form of UTC deferred stock units. Participants are vested in their own deferrals and vest in the UTC match after three years of service. SRP balances may be distributed at the election of the participant in a lump-sum payment or in annual installments over a periodperiods ranging from two to fifteen years. Employee deferrals are distributed in cash and Company matching amounts are distributed in shares of Common Stock. | 68 | |
COMPENSATION TABLES Company Automatic Contribution Excess Plan (“CACEP”) Salaried employees, including NEOs, hired on or after January 1, 2010 do not participate in UTC’s pension plans. These employees insteaddo, however, receive age-based Company automatic contributions equal(equal to a percentage of salary and annual bonusbonus) to their tax-qualified UTC 401(k) Savings Plan account each payroll period. The purpose of the unfunded, non-qualified Company Automatic Contribution Excess Plan (“CACEP”)CACEP is to continue to credit suchthese age-based Company automatic contributions on compensation that exceeds the Internal Revenue Code limit applicable to the tax-qualified UTC 401(k) Savings Plan. Participants receiving benefits under the CACEP do not accrue a benefit under the UTC Pension Preservation Plan.PPP. In 2015, Mr.2016, Messrs. Johri was the only NEO whoand Leduc each participated in the CACEP for which heand received a credit equal to 5.5% of pay.pay above the IRS limit. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 65 |
COMPENSATION TABLES
UTC Deferred Compensation Plan (“DCP”) The UTC Deferred Compensation Plan (“DCP”)DCP is a non-qualified, unfunded deferred compensation arrangement that offers participants the opportunity to defer up to 50% of base salary and up to 70% of annual bonus. The minimum deferralbonus until retirement or a fixed period isof at least five years. All distributions are made in cash and, at the election of the participant, in either a lump-sum payment or in annual installments over a periodperiods between two and fifteen years.years, at the election of the participant. If a participant’s employment terminates prior to retirement eligibility, all balances are paid as a lump-sum in April following termination. Investment Options Amounts deferred by participants under the SRP, CACEP and/or DCP may be allocated to one or more of the following hypothetical investment accounts: | Hypothetical Investment Accounts* | | 20152016 Return | | Income Fund | | 3.563.4 | % | | Equity Fund—S&P 500 Index | | 1.3811.9 | % | | Government / Credit Bond Fund | | 0.193.1 | % | | Small Company Stock Index Fund | | -3.3816.7 | % | | International Equity Index | | -0.601.1 | % | | Emerging Equity Index Fund | | -15.1511.4 | % | | UTC Common Stock with dividend reinvestment | | -13.9916.5 | % |
| * | Additional age-specific retirement date funds are also available. In 2015, the2016, NEOs participated in theTarget Retirement Fund 2005 (5.2% return), Target Retirement Fund 2010 (5.9% return), Target Retirement Fund 2015 (6.8% return) and Target Retirement Fund 2020 which returned -2.13%, and the Target Retirement Fund 2025, which returned -2.26%(7.4% return). |
PSU Deferral Plan The PSU Deferral Plan allows executives to defer between 10% and 100% of their vested PSU awards that would otherwise upon vesting would be settled in unrestricted shares of Common Stock. Upon vesting, theThe deferred portion of the PSU award is converted into deferred stock units that accrue dividend equivalents. Distributions from the PSU Deferral Plan are made in full or in two to fifteen annual installments, either upon retirement or in a future year selected by the executive (no earlier than five years from the year the PSUs are deferred)deferred for executives who elect a future distribution date). Distributions are made in whole shares of Common Stock with any fractional units paid in cash. None of the NEOs participated in the PSU Deferral Plan in 2016. 66Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
COMPENSATION TABLES POTENTIAL PAYMENTS ON TERMINATION OR CHANGE-IN-CONTROL This table estimates the value of payments and benefits that each NEO would have been entitled to receive had employment terminated on December 31, 20152016 under various hypothetical circumstances, except for Mr. Bellemare where actual payments are shown as a result of his retirement on January 31, 2015.circumstances. Under UTC’s programs, benefit eligibility and the value of benefits an executive is entitled to receive vary depending on the reason for termination and whether the executive is eligible for retirement at that time. | Payment Type | | G. Hayes | | | A. Johri | | | G. Darnis | | | P. Adams | | | C. Gill, Jr. | | | A. Bellemare | (1) | | G. Hayes | | A. Johri | | R. McDonough | | P. Delpech | | R. Leduc | | Involuntary Termination (For Cause) | Involuntary Termination (For Cause) | | | | | | | | | | | | | | | | | | | | | | | | | Cash Payment | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | – | | | $0 | | $0 | | $0 | | $0 | | $0 | | Pension Benefit(2) | | $11,308,482 | | | $2,328,667 | | | $18,224,128 | | | $2,410,229 | | | $6,043,024 | | | – | | | | Pension Benefit(1) | | | $11,807,039 | | $2,379,540 | | $637,533 | | $423,035(2) | | $0 | | Option/SAR Value(3) | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | – | | | $0 | | $0 | | $0 | | $0 | | $0 | | Stock Award Value(4) | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | – | | | | Stock Award Value(4)(5) | | | $0 | | $0 | | $0 | | $0 | | $0 | | Sub-Total | | $11,308,482 | | | $2,328,667 | | | $18,224,128 | | | $2,410,229 | | | $6,043,024 | | | – | | | $11,807,039 | | $ 2,379,540 | | $637,533 | | $ 423,035 | | $0 | | Less: Vested Pension | | -$11,308,482 | | | -$2,328,667 | | | -$18,224,128 | | | -$2,410,229 | | | -$6,043,024 | | | – | | | ($11,807,039) | | ($2,379,540) | | ($637,533) | | ($423,035) | | $0 | | Amount Triggered due to Termination | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | – | | | $0 | | $0 | | $0 | | $0 | | $0 | | Voluntary Termination | Voluntary Termination | | | | | | | | | | | | | | | | | | | | | | | | | Cash Payment | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | – | | | $0 | | $0 | | $0 | | $0 | | $0 | | Pension Benefit(2) | | $11,308,482 | | | $2,328,667 | | | $18,224,128 | | | $2,410,229 | | | $6,043,024 | | | – | | | | Pension Benefit(1) | | | $11,807,039 | | $2,379,540 | | $637,533 | | $423,035(2) | | $0 | | Option/SAR Value(3) | | $13,020,790 | | | $2,575,909 | | | $21,591,050 | | | $3,816,268 | | | $12,131,213 | | | – | | | $15,303,835 | | $3,737,571 | | $4,404,018 | | $653,310 | | $2,277,120 | | Stock Award Value(4) | | $2,894,397 | | | $0 | | | $2,824,074 | | | $1,173,975 | | | $2,024,771 | | | – | | | | Stock Award Value(4)(5) | | | $2,164,995 | | $531,657 | | $0 | | $3,014,660 | | $0 | | Sub-Total | | $27,223,669 | | | $4,904,576 | | | $42,639,252 | | | $7,400,472 | | | $20,199,008 | | | – | | | $29,275,869 | | $6,648,768 | | $5,041,551 | | $4,091,005 | | $2,277,120 | | Less: Vested Pension and Equity | | -$27,223,669 | | | -$4,904,576 | | | -$42,639,252 | | | -$7,400,472 | | | -$20,199,008 | | | – | | | ($29,275,869) | | ($6,648,768) | | ($5,041,551) | | ($4,091,005) | | ($2,277,120) | | Amount Triggered due to Termination | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | | | – | | | $0 | | $0 | | $0 | | $0 | | $0 | | Involuntary Termination (Not For Cause) or Retirement | Involuntary Termination (Not For Cause) or Retirement | | | | | | | | | | | | | | | | | | | | | | | | Cash Payment(5)(6) | | $3,250,000 | | | $0 | | | $2,750,000 | (9) | | $1,625,000 | (9) | | $1,812,500 | | | $2,492,288 | | | $3,750,000 | | $0 | | $2,062,500 | | $0 | | $0 | | Pension Benefit(2) | | $11,308,482 | | | $2,328,667 | | | $18,224,128 | | | $2,410,229 | | | $6,043,024 | | | $6,443,324 | | | | Pension Benefit(1) | | | $11,807,039 | | $2,379,540 | | $637,533 | | $423,035(2) | | $0 | | Option/SAR Value(3) | | $13,020,790 | | | $2,575,909 | | | $21,591,050 | | | $3,816,268 | | | $12,131,213 | | | $4,346,755 | | | $15,303,835 | | $3,737,571 | | $4,404,018 | | $653,310 | | $2,277,120 | | Stock Award Value(4) | | $2,894,397 | | | $0 | | | $2,824,074 | | | $1,173,975 | | | $2,024,771 | | | $2,773,349 | | | | Stock Award Value(4)(5) | | | $2,164,995 | | $531,657 | | $0 | | $3,014,660 | | $0 | | Sub-Total | | $30,473,669 | | | $4,904,576 | | | $45,389,252 | | | $9,025,472 | | | $22,011,508 | | | $16,055,716 | | | $33,025,869 | | $6,648,768 | | $7,104,051 | | $4,091,005 | | $2,277,120 | | Less: Vested Pension and Equity | | -$27,223,669 | | | -$4,904,576 | | | -$42,639,252 | | | -$7,400,472 | | | -$20,199,008 | | | -$13,563,428 | | | ($29,275,869) | | ($6,648,768) | | ($5,041,551) | | ($4,091,005) | | ($2,277,120) | | Amount Triggered due to Termination | | $3,250,000 | | | $0 | | | $2,750,000 | | | $1,625,000 | | | $1,812,500 | | | $2,492,288 | | | $3,750,000 | | $0 | | $2,062,500 | | $0 | | $0 | Termination following a Change-in-Control(6)(7) | Termination following a Change-in-Control(6)(7) | | | | | | | | | | | | | | Termination following a Change-in-Control(6)(7) | | | | | | | | | | | Cash Payment(7)(8) | | $10,300,550 | | | $0 | | | $6,906,900 | | | $3,789,825 | | | $4,010,338 | | | – | | | $11,885,250 | | $0 | | $2,062,500 | | $0 | | $0 | | Pension Benefit(2) | | $11,308,482 | | | $2,328,667 | | | $18,224,128 | | | $2,410,229 | | | $6,043,024 | | | – | | | | Pension Benefit(1) | | | $11,807,039 | | $2,379,540 | | $637,533 | | $423,035(2) | | $0 | Option/SAR Value(8)(9) | | $13,020,790 | | | $2,575,909 | | | $21,591,050 | | | $4,474,896 | | | $12,131,213 | | | – | | | $19,013,035 | | $4,945,871 | | $6,258,618 | | $2,507,910 | | $4,388,240 | Stock Award Value(8)(9) | | $6,689,162 | | | $5,728,174 | | | $4,937,614 | | | $4,591,762 | | | $4,500,495 | | | – | | | $10,139,850 | | $8,562,089 | | $6,940,919 | | $7,826,320 | | $4,197,459 | | Sub-Total | | $41,318,984 | | | $10,632,750 | | | $51,659,692 | | | $15,266,712 | | | $26,685,070 | | | – | | | $52,845,174 | | $15,887,500 | | $15,899,570 | | $10,757,265 | | $8,585,699 | | Less: Vested Pension and Equity | | -$27,223,669 | | | -$4,904,576 | | | -$42,639,252 | | | -$7,400,472 | | | -$20,199,008 | | | – | | | ($29,275,869) | | ($6,648,768) | | ($5,041,551) | | ($4,091,005) | | ($2,277,120) | | Amount Triggered due to Termination | | $14,095,315 | | | $5,728,174 | | | $9,020,440 | | | $7,866,240 | | | $6,486,062 | | | – | | | $23,569,305 | | $9,238,732 | | $10,858,019 | | $6,666,260 | | $6,308,579 |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners70 | 67 |
COMPENSATION TABLES | (1) | Mr. Bellemare retired from UTC effective January 31, 2015. The value shown includes the ELG cash separation benefit (including interest earned at 3.5% during the payment deferral period required by the IRC) that Mr. Bellemare received as a result of his retirement and a $200,000 retainer fee paid in connection with an 18-month consulting agreement Mr. Bellemare entered into with UTC following his retirement. Details of this agreement are found in footnote (6)(f) of the Summary Compensation Table on page 58. The pension benefits shown for Mr. Bellemare include amounts accrued under the Pratt & Whitney Canada Salaried and Executive Employee Pension Plans which were distributed following retirement, as shown in the Pension Benefits table on page 63. | | | (2) | Amounts reflect the estimated lump-sum value of the non-qualified portion of the retirement benefits accrued under UTC’s pension plans, assuming retirement or termination on December 31, 2015,2016, payable as of such date or attainment of age 55 (if later), or the actual retirement date, if known.. The present value of benefits payable under the qualified plan are shown in the Pension Benefits table on page 63.66. Mr. Leduc separated employment from UTC on January 15, 2014, triggering previously accrued pension benefit payments which he continues to receive (see footnote (2) of the Pension Benefits table on page 66 for more details). Upon re-employment on January 15, 2016, Mr. Leduc is no longer eligible to accrue benefits under UTC’s legacy pension plans. | | | | (2) | Mr. Delpech is not eligible for participation under U.S.-based retirement plans. The amounts shown for Mr. Delpech reflect the estimated lump-sum value of retirement benefits accrued under an individual pension insurance contract, assuming termination on December 31, 2016, payable as of such date. Benefits accrue monthly at 20% of base salary and earn at least a minimum interest rate of 3.25%. Distribution is scheduled to be made as a lump-sum at retirement. However, if Mr. Delpech’s employment terminates for any reason prior to retirement, he is entitled to the vested amounts accrued under his contract as of the date of separation. | | | | | (3) | The vesting of outstanding SARs or options (other than the unvested portion of the performance-based SARsSAR awards and special sign-on SARs)out-of-cycle grants) that have been outstanding for at least one year will be accelerated in the event of a voluntary termination or an involuntary (not for cause) termination after attaining qualifying retirement age (55(age 55 plus ten years of service)service or satisfying the rule of 65 (age– between age 50 and 55 plus fifteen years of service)service add up to 65 or more). Each of theAll NEOs, satisfiesexcept for Mr. McDonough, satisfy one or both of these conditions. Amounts shown are based on the December 31, 2015 closing price of ourUTC Common Stock on the NYSE ($109.62) on the last trading day of $96.07.2016. In the event of an involuntary termination for cause, outstanding SARs are forfeited. | | | | | (4) | In the event of a voluntary termination or an involuntary (not for cause) termination following attainment of qualifying retirement age or satisfying the rule of 65, PSUs outstanding for at least one year remain eligible to vest following completion of the performance period to the extent performance targets are achieved. Amounts shown are based on the December 31, 2015 closing price of ourUTC Common Stock on the NYSE ($109.62) on the last trading day of $96.072016. Maximum- and target-levelthreshold-level vesting is shown for the 20152016 and 20142015 PSU grants, and therespectively, based on estimated performance as of December 31, 2016. The actual vesting level(0%) is shown for the 20132014 PSU grant. In the event of an involuntary termination for cause, outstanding PSUs are forfeited. | | | | | (5) | Sign-on and retention RSU awards forfeit upon voluntary or involuntary terminations, regardless of the retirement eligibility status of the executive. ELG RSUs will vest in the case of mutually agreeable separation (as defined on pages 47-48) following three years of ELG service (and for Mr. McDonough, only after obtaining age 62). Receipt of the ELG RSU award is contingent upon execution of an agreement containing the following restrictive covenants made by the executive for the protection of UTC: (i) non-compete; (ii) employee non-solicitation; (iii) non-disparagement; (iv) protection of confidential, sensitive and proprietary information; and (v) post-termination cooperation. | | | | (6) | Reflects the ELG cash separation benefit, which equals 2.5x base salary. This benefit is payable as a lump-sum in the event of a mutually agreeable separation (defined on page 44)pages 47-48) following at least three years of ELG service (and for certain ELG members, is dependent onMr. McDonough only if separation occurs prior to age at separation)62). Receipt of the ELG separation benefit is contingent upon execution of an agreement containing the following covenants made by the executive for the protection of UTC: (i) non-compete; (ii) employee non-solicitation; (iii) non-disparagement; (iv) protection of confidential, sensitive and proprietary information; and (v) post-termination cooperation.subject to post-employment restrictions, as described in footnote (5) above. The ELG separation benefit is not treated as compensation for purposes of determining benefits under UTC’s pension plans or any other benefit programs. Distributions are subject to certain restrictions imposed by Internal Revenue Code Section 409A. ELG members appointed on or after May 2013, including Mr.Messrs. Johri, Delpech and Leduc are not eligible for this cash separation benefit.benefit and instead received an ELG RSU grant, as described above in footnote (5). | | | | (6)(7) | Change-in-control benefits are provided in accordance with the Senior Executive Severance Plan (“SESP”), which was closed to new participants effective June 2009. Accordingly, Mr. Hayes is the only NEO eligible for the SESP benefit. Acquisition of 20% of UTC’s voting securities by a person or a group or a change in the majority of the Board of Directors, constituteconstitutes a change-in-control. SESP benefits are provided to eligible executives in the event of an involuntary termination or resignation for “good reason” (i.e., a material adverse change in the executive’s compensation, responsibilities, authority, reporting relationship or work location) within two years following a change-in-control event. Receipt of SESP benefits isare subject to various restrictive covenants. An executive may receive the greater of the SESP or the ELG cash separation benefit (as described in footnote (5)(6) above), but not both. The SESP cash severance benefit is reduced by 1/36thfor each month that termination occurs after age 62 and, accordingly, is completely phased out at age 65. | | | | (7)(8) | A lump-sum cash benefit payable under the SESP in an amount equal to 2.99x the sum of the executive’s base salary and target annual bonus is applicable for ELG members appointed prior to June 2009.2009 (Mr. Hayes only). ELG members appointed on or after June 2009 but prior to May 2013 (Mr. McDonough only) are eligible for the standard ELG cash severance payment upon change-in-control (2.5x base salary), while ELG appointeesappointed on or after May 2013, including Mr.Messrs. Johri, Delpech and Leduc, are not eligible for a cash payment under either program. | | | | (8)(9) | In the event of termination for “good reason” (as defined on page 45)48) following a change-in-control, the LTIP provides for the accelerated vesting of all outstanding equity awards (including awards outstanding for less than one year, unvested performance-based SAR awards and special out-of-cycle equity awards and ELG RSU awards). Amounts shown are based on the December 31, 2015 closing price of ourUTC Common Stock on the NYSE ($109.62) on the last trading day of $96.07.2016. PSU and performance-based SAR values reflect vesting at target, except where actual performance is known as of December 31, 2015. | | | (9) | Mr. Darnis and Mr. Adams retired from UTC effective January 31, 2016 and February 29, 2016, respectively. Following retirement, UTC entered into one-year consulting agreements valued at $300,000 for Mr. Darnis and $200,000 for Mr. Adams, which are excluded from the values shown.2016. |
Post-Employment Consulting Arrangements
In some cases, the Company enters into post-employment consulting arrangements to assist in the transition of an executive’s responsibilities and for support on matters in-process at the time of retirement. Because the LTIP recognizes service rendered in a consulting capacity, the termination date for vesting purposes under the LTIP may be later than the date employment ends.
Mr. Bellemare entered into a $200,000, 18-month consulting agreement following his retirement to remain available to provide advice on strategic matters related to our aerospace businesses. He will therefore remain eligible to vest in his 2015 SAR and PSU awards. Mr. Darnis entered into a one-year consulting agreement for $300,000 to advise on strategic matters and to assure continuity in key customer relationships. This arrangement will not impact the vesting of his long-term incentive awards. Pursuant to a one-year $200,000 consulting agreement following his retirement on February 29, 2016, Mr. Adams will remain available to provide technical advice and support on Pratt & Whitney’s GTF programs. As a result of this arrangement, his 2016 PSU and SAR awards and his 2012 performance-based SAR award remain eligible to vest, subject to the continuation of this consulting relationship through December 2016. His 2015 PSU and SAR awards were eligible to vest without regard to this agreement. In addition, the RSU award granted on December 1, 2015 remains eligible to vest, provided that his consulting relationship continues through February 28, 2017.
68Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
Report of the Audit Committee The Audit Committee assists the Board of Directors in its oversight of UTC’s financial accounting and reporting processes and the adequacy of its system of internal controls and processes to assure compliance with Company policies and procedures, its Code of Ethics and applicable laws and regulations. The Committee annually nominates an independent auditor for appointment by the shareowners, and evaluates the independence, qualifications and performance of UTC’s internal and independent auditors. Specific responsibilities of the Committee are set forth in the Audit Committee Charter adopted by the Board, which is available on the Company’s website. Management has the primary responsibility for the financial statements and the financial reporting processes, including the system of internal accounting controls. PricewaterhouseCoopers LLP (“PwC”), the Company’s Independent Auditor, is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting. In fulfilling its oversight responsibilities, the Committee has reviewed and discussed with management and the Independent Auditor UTC’s audited financial statements as of and for the year ended December 31, 2015,2016, as well as the representations of management and the Independent Auditor’s opinion thereon regarding UTC’s internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. The Committee discussed with UTC’s internal and independent auditors the overall scope and plans for their respective audits. The Committee met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, the evaluation of UTC’s internal controls, management’s representations regarding internal control over financial reporting, and the overall quality of UTC’s financial reporting. The Committee has discussed with UTC’s Independent Auditor the matters required by the Public Company Accounting and Oversight Board’s (“PCAOB”) Auditing Standard No. 16No.1301,Communications with Audit Committees.. It has also discussed with UTC’s Independent Auditor its independence from UTC and its management, including the written disclosures and letter from UTC’s Independent Auditor required by the PCAOB’s Rule 3526,Communication with Audit Committees Concerning Independence,as approved by the SEC. The Committee has concluded that PwC’s provision of non-audit services as described in the table on pages 7073 and 7174 is compatible with PwC’s independence. UTC’s Independent Auditor represented to the Committee that UTC’s audited financial statements were fairly presented in accordance with generally accepted accounting principles in the United States of America. Based on the reviews and discussions referred to above, the Committee has recommended to the Board of Directors that the audited financial statements be included in UTC’s Annual Report on Form 10-K for the year ended December 31, 20152016 for filing with the SEC. The Committee nominates the firm of PricewaterhouseCoopers LLP for appointment by the shareowners as UTC’s Independent Auditor for 2017. | Audit Committee | | Edward A. Kangas, Chair | | | | Fredric G. Reynolds | Ellen J. KullmanDiane M. Bryant* | | | | H. Patrick Swygert | | Richard B. Myers | | | | André Villeneuve | | * Appointed a member of the Committee effective January 1, 2017. | | | |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners72 | 69 |
Proposal 2: Appointment of a Firm of Independent Registered Public Accountants to Serve as Independent Auditor for 20162017 As required by UTC’s Bylaws, we are asking shareowners to vote on a proposal to appoint a firm of independent registered public accountants to act as the Company’s Independent Auditor until the next annual meeting.Annual Meeting. PricewaterhouseCoopers LLP, an independent registered public accounting firm, served as UTC’s Independent Auditor in 20152016 and 2014,2015, and the Audit Committee has nominated the firm for appointment by the shareowners to serve again as UTC’s Independent Auditor for 2016.2017. The Audit Committee is directly responsible for the nomination, compensation, retention and oversight of the Company’s independent auditor.Independent Auditor. To fulfill this responsibility, the Committee engages in a comprehensive annual evaluation of the independent auditor’sIndependent Auditor’s qualifications, performance and independence, and periodically considers the advisability and potential impact of selecting a different independent registered public accounting firm to serve in that capacity. The Audit Committee has nominated, and the Board of Directors has approved the nomination of, PricewaterhouseCoopers LLP to serve as our Independent Auditor for 20162017 and until the next Annual Meeting in 2017.2018. PricewaterhouseCoopers LLP has acquired extensive knowledge of the Company’s operations, performance and development through its previous service as the Company’s Independent Auditor. In accordance with SEC rules and PricewaterhouseCoopers LLP policies, audit partners are subject to rotation requirements that limit the number of consecutive years an individual partner may provide service to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy includes a meeting ofwith the Chairman of the Audit Committee withand the candidate for the role, as well as consideration of the candidate’s qualifications by the full Committee and with management. The Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as our Independent Auditor is in the best interest of the Company and our shareowners. Representatives of PricewaterhouseCoopers LLP will be present at the 20162017 Annual Meeting, will have an opportunity to make any statements they desire, and will also be available to respond to appropriate questions from shareowners. UTC paid the following fees to PricewaterhouseCoopers LLP for 2015in 2016 and 2014:2015: | (in thousands) | | 2015 | | | 2014 | | | Audit Fees | | $40,961 | | | $42,054 | | | Audit-Related Fees | | $9,930 | | | $5,535 | | | Tax Fees | | $19,926 | | | $18,712 | | | All Other Fees | | $5,707 | | | $757 | | | Total | | $76,524 | | | $67,058 | |
| (in thousands) | | 2016 | | | 2015 | | | Audit Fees | | $39,744 | | | $40,961 | | | Audit-Related Fees | | $5,676 | | | $9,930 | | | Tax Fees | | $18,183 | | | $19,926 | | | All Other Fees | | $557 | | | $5,707 | | | Total | | $64,160 | | | $76,524 | |
70Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
PROPOSAL 2:Appointment of Independent Auditor for 2016APPOINTMENT OF INDEPENDENT AUDITOR Audit Fees in both years consisted of fees for the audit of UTC’s consolidated annual financial statements and the effectiveness of its internal control over financial reporting, the review of interim financial statements in UTC’s quarterly reports on Form 10-Q and the performance of audits in accordance with statutory requirements. Audit fees for statutory audits were $16,900,000 in 2016 and $16,000,000 in 2015 with the increase in 2016 due to additional audits attributable to UTC acquisitions. Audit-Related Fees in both years consisted of fees for financial and tax due diligence assistance related to acquisition and disposition activity, employee benefit plan audits, advice regarding the application of generally accepted accounting principles tofor proposed transactions, special reports pursuant to agreed-upon procedures, contractually required audits and compliance assessments. Audit-Related Fees in 2015 also included services related to our discontinued operations, including carve-out audits and other agreed upon procedures with fees of approximately $5,400,000. $400,000 of our 2015 Audit-Related fees were reimbursed pursuant to contractual agreements with third parties. There were $0 Audit-Related Fees for services related to discontinued operations or related reimbursements in 2016. Tax Fees in 2016 consisted of approximately $12,773,000 for U.S. and non-U.S. tax compliance, related planning and assistance with tax refund claims, and expatriate tax services, and approximately $5,410,000 for tax consulting and advisory services. In 2015, Tax Fees consisted of approximately $9,955,000 for U.S. and non-U.S. tax compliance, related planning and assistance with tax refund claims, and expatriate tax services, and approximately $9,971,000 for tax consulting and advisory services. In 2014, Tax All Other Fees in 2016 primarily consisted of approximately $11,429,000 for U.S.accounting research software, benchmarking, government compliance and non-U.S. tax compliance, related planning and assistance with tax refund claims, and expatriate tax services, and approximately $7,283,000 for tax consulting and advisoryother services. All Other Fees in 2015 primarily consisted of accounting research software, benchmarking, government compliance, business disposition separation and other services. All Other Fees in 2014 primarily consisted of accounting research software, benchmarking, government compliance and other services. The Audit Committee has adopted procedures requiring Committee review and approval in advance of all particular engagements for services provided by UTC’s Independent Auditor. Consistent with applicable laws, the procedures permit limited amounts of services, other than audit, review or attest services, to be approved by one or more members of the Committee pursuant to authority delegated by the Committee, provided the Committee subsequently is informed of each particular service approved by delegation. All of the engagements and fees for 20152016 and 20142015 were approved by the Committee. The Committee reviews with PricewaterhouseCoopers LLP whether the non-audit services to be provided are compatible with maintaining the firm’s independence. The Board has also adopted the policy that in any year fees paid to the Independent Auditor for non-audit services shall not exceed the fees paid for audit and audit-related services. Non-audit services consist of those described above, as included in the Tax Fees and All Other Fees categories. | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTE FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP. |   | 
FOR |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 71 |
Proposal 3: Amendment to Our Restated Certificate of Incorporation to Eliminate Cumulative Voting for Directors
In September 2015, in conjunction with the Board’s adoption of “proxy access” Bylaw provisions, the Board approved an amendment to UTC’s Restated Certificate of Incorporation to eliminate cumulative voting in the election of directors, subject to shareowners’ approval at the 2016 Annual Meeting(1). Cumulative voting enables a shareowner to concentrate his or her voting power in favor of the election of one or more nominees, rather than casting one vote per share. Accordingly, the use of cumulative voting rights can permit one or more directors to be elected based on the votes of a minority of shareowners casting votes in the election. The Board believes that each director should represent the interests of all shareowners rather than potentially only the interests of a limited constituency. Therefore, and as further discussed below, the Board believes that it is in the best interests of the Company and its shareowners to eliminate cumulative voting.
BACKGROUND
The Company’s Bylaws provide that in uncontested elections, directors are elected according to a majority vote standard. In other words, a nominee is elected if the votes cast “for” the nominee exceed 50% of the total votes cast with respect to that nominee’s election. In contested elections, directors are elected by a plurality of the votes cast—those nominees who receive the most votes are elected even though the votes in favor of one or more nominees may be fewer than a majority of votes cast.
Cumulative voting, which the Company’s Restated Certificate of Incorporation currently permits, enables a shareowner to “cumulate” his or her voting power. This means a shareowner can cast a number of votes equal to the number of shares the shareowner holds multiplied by the number of directors to be elected for a single nominee, or among fewer than all nominees.
By allowing shareowners to cast multiple votes for a single or few nominees, instead of voting separately on each nominee, cumulative voting can result in the election of a board member who has not been supported by the holders of a majority of the shares voting on the election of directors.
RATIONALE
The Board believes that maintaining cumulative voting in UTC’s corporate governance structure is problematic for a number of reasons:
Cumulative voting provides an unusual mechanism through which a minority shareowner can disrupt one of the most fundamental shareowner decisions, in opposition to the clear wishes of shareowners representing a majority of shares voting. UTC’s recently adopted proxy access provisions, in contrast to cumulative voting, establish procedures through which all shareowners, including minority shareowners, can share their opinions and actively participate in elections without giving a minority shareowner the ability to have a disproportionate influence by overruling the wishes of a majority of shareowners.
(1) | UTC adopted “proxy access” Bylaw provisions that permit a shareowner, or a group of up to 20 shareowners, owning at least three percent of UTC’s outstanding shares of Common Stock continuously for at least three years to nominate and include in UTC’s annual meeting proxy materials director nominees who, if elected, would constitute up to twenty percent of the Board, provided that the shareowner(s) and nominee(s) satisfy the requirements specified in UTC’s Bylaws, which are available at:http://www.utc.com/Our-Company/Corporate-Governance/Documents/Bylaws.pdf. |
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PROPOSAL 3:Amendment to Our Restated Certificate of Incorporation to Eliminate Cumulative Voting for Directors
• | A system in which shareowners can cast one vote per share for each director nominee is the prevailing election standard among large U.S. public companies and employed by the vast majority of S&P 500 companies. Very few large publicly traded companies (including only two other S&P 100 companies) provide for cumulative voting. In recent years, a number of publicly traded companies have eliminated cumulative voting, often in connection with adopting a majority voting standard or proxy access. | | | • | Cumulative voting gives an advantage to minority shareowners with relatively large holdings, whose interests and objectives may not necessarily align with the views of a majority of our shareowners. These special-interest shareowners (or small groups of such shareowners) could cumulate their votes to elect specific directors who otherwise would not be elected. Such directors may be focused on the special interests or agendas of those who cumulated votes to elect them, which could create divisiveness among Board members and impair the Board’s ability to operate effectively. |
Both management and the Board of Directors view this proposal to eliminate cumulative voting as an appropriate balancing measure in view of the annual election of UTC’s directors, the recently adopted proxy access provisions and the director majority voting standard.
AMENDMENT
The proposed amendment would delete in its entirety the text of Clause (h) of Article Eighth of our Restated Certificate of Incorporation. A copy of the proposed amendment, marked with strike-outs to show the deletions, is included in Appendix A. A copy of the complete Restated Certificate of Incorporation is available from the Corporate Secretary at corpsec@corphq.utc.com or Corporate Secretary, UTC, 10 Farm Springs Road, Farmington, CT 06032.
If this proposal to eliminate cumulative voting is approved, the amendment to our Restated Certificate of Incorporation would become effective upon the filing of a Certificate of Amendment with the State of Delaware, which the Company would intend to file promptly following the shareowner vote. Cumulative voting would not be permitted in elections of directors thereafter, including the 2017 Annual Meeting of shareowners. The Board of Directors has also unanimously approved amendments to UTC’s Bylaws to incorporate conforming changes to reflect the elimination of cumulative voting, in the event that the amendment to the Restated Certificate of Incorporation is approved by shareowners.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING. | |
FOR |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 73 |
Proposal 4:3:Advisory Vote to Approve Named Executive Officer Compensation Each year we ask shareowners to approve, on an advisory basis, the compensation of UTC’s Named Executive Officers. We encourage you, before voting, to read the Compensation Discussion and Analysis (“CD&A”) on pages 2728 to 55,58, along with the compensation tables on pages 5760 to 68,71, and to consider the information the CD&A provides about the alignment between UTC’s performance and our executives’ compensation. The CD&A also describes recent changes to our compensation programs that are designed to enhance corporate governance and align executive and shareowner interests. Under the rules of the Securities and Exchange Commission, your vote is advisory and will not be binding on the Board or the Company. However, UTC values the Boardopinion of its shareowners and will reviewconsider the voting results and give them serious considerationoutcome of the vote when making future executive compensation decisions. As more fully discussed in the CD&A, the fundamental objective of UTC’s compensation program is to closely align our executives’ compensation opportunities with the long-term interests of our shareowners. For senior leadership, the substantial majority of compensation is both stock-based and contingent on performance. We base long-term incentive compensation on the achievement of performance metrics that link directly to sustainable performance and long-term shareowner value. We use relevant benchmarkingbenchmarks to assureensure that overall compensation levels are competitive in order to recruit, retain and opportunities align effectively with competitive market practices.motivate talented executives critical to UTC’s long-term success. The design and operation of an executive compensation program for a large, complex, global enterprise such as UTC involves multiple objectives. The Board believes that UTC’s executive compensation programs have been effective in attracting and retaining senior business leaders with the requisite talent and skills to drive UTC’s financial, strategic and operational performance. As described on page 3334 of this Proxy Statement, UTC’s executive compensation programs are designed to support the following guiding principles: | • | Responsibility:Compensation should take into account each executive’s responsibility to act in accordance with our ethical, environmental, health and safety objectives at all times. Financial, strategic and operational performance must not compromise these values. A complete commitment to ethical and corporate responsibility is a fundamental principle incorporated into all aspects of our compensation program. | | | | • | Pay-for-performance:A substantial portion of compensation should be variable, contingent on and directly linked to individual, Company and business unit performance. | | | | | • | Shareowner alignment:The financial interests of executives should be aligned with the long-term interests of our shareowners through stock-based compensation and performance metrics that correlate with long-term shareowner value. | | | • | Long-term focus:For our most senior executives, long-term, stock-based compensation opportunities should significantly outweigh short-term, cash-based opportunities. Annual objectives should complement sustainable long-term performance. | | | | | • | Competitiveness:Total compensation should be sufficiently competitive to attract, retain and motivate a leadership team capable of maximizing UTC’s performance. Each element should be benchmarked relative to peers. | | | | | • | Balance:The portion of total compensation contingent on performance should increase with an executive’s level of responsibility. Annual and long-term incentive compensation opportunities should reward the appropriate balance of short- and long-term financial, strategic and operational business results. | | | • | Responsibility:Compensation should take into account each executive’s responsibility to act in accordance with our ethical, environmental, health and safety objectives at all times. Financial and operating performance must not compromise these values. A complete commitment to ethical and corporate responsibility is a fundamental principle incorporated into all aspects of our compensation program. |
74Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
PROPOSAL 4:3: Advisory Vote to Approve Named Executive Officer CompensationADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION Shareowner alignment:The financial interests of executives should be aligned with the long-term interests of our shareowners through stock-based compensation and performance metrics that correlate with long-term shareowner value. As in the past, long-term sustainable growth continues to be the driver behind the strategic and financial decisions of our senior executives. This can be seen in our cumulative total return to shareowners over the ten-year period ending December 31, 2015,2016, which equaled 115%121%. These returns are in excess of results for the Dow Jones Industrial Average (111%(106%) and the S&P 500 (102%(96%) indices for the same period, as well as the Capital Goods industry sector (99%(103%), of which UTC is a component. The Board believes that our executive compensation program plays a key role in driving and sustaining this level of performance. The Board remains committed to robust corporate governance practices and strongly shares the interest of shareowners in maintaining effective, performance-based executive compensation programs at UTC.programs. In that regard, as discussed in the CD&A, the Committee has over the years made a number ofon Compensation and Executive Development makes ongoing changes to our executive compensation programs, often in direct response to input from shareowners. The Board believes that UTC’s executive compensation programs have effectively aligned pay with performance by incentivizing strong financial performance while encouraging long-term growth objectives. A balanced, competitive compensation program is also essential for attracting and retaining talented executives. Accordingly, the Board recommends that shareowners vote FOR the following resolution: “RESOLVED, that the compensation of UTC’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and related information provided on pages 2728 to 6871 of this Proxy Statement, is hereby APPROVED on an advisory basis.” As a matter of law, the approval or disapproval of this Proposal 43 may not be construed as overruling any decision by UTC or the Board, or as imposing any duty or obligation on UTC, the Board or any individual director. | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ABOVE RESOLUTION TO APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF UTC’S NAMED EXECUTIVE OFFICERS. | |
FOR |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners76 | 75 |
Proposal 4:Advisory Vote on the Frequency of Shareowner Votes on Named Executive Officer Compensation As required by federal securities law, the Board requests your advisory vote on the intervals at which shareowners should vote to approve the compensation of UTC’s named executive officers (“NEOs”) - whether every year, every two years or every three years. Since UTC began holding an advisory “Say-on-Pay” vote in 2011, it has submitted its executive compensation to an advisory vote every year. Although your vote on this frequency proposal is advisory and thus not binding on the Board, the Board will consider the outcome of the shareowner vote in making its decision. The Board believes that an advisory vote on NEO compensation that occurs every year is the most appropriate alternative. The Board believes that an annual “Say-on-Pay” vote enables shareowners to provide frequent, direct input to the Company regarding its compensation philosophy, policies and practices. Holding the vote at one-year intervals also enhances shareowner communication by providing a clear, simple means for the Company to ascertain general investor sentiment regarding the Company’s executive compensation program. | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AN ANNUAL SHAREOWNER ADVISORY VOTE ON THE COMPENSATION OF UTC’S NAMED EXECUTIVE OFFICERS. | |  |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 77 |
General Information About the Annual Meeting Your vote is very important. Please vote your shares in advance of the meeting, using one of the voting methods described below.
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ACCESSING PROXY MATERIALS
To conserve natural resources and reduce costs, we are sending most shareowners a brief Notice of Internet Availability of Proxy Materials, as permitted by SEC rules. This Notice explains how you can access UTC’s proxy materials on the Internet and how to obtain printed copies if you prefer. It also explains how you can choose either electronic or print delivery of proxy materials for future Annual Meetings. 
WHO CAN VOTEVOTE?
You are entitled to vote at the Annual Meeting if you owned shares of Common Stock at the close of business on February 29, 2016,28, 2017, which is referred to as the “record date.” A list of registered shareowners entitled to vote at the meeting will be available at UTC’s offices, 10 Farm Springs Road, Farmington, CT 06032, during the ten days prior to the meeting and also at the meeting. 
ATTENDING THE MEETING
You or your authorized proxy can attend the Annual Meeting if you were a registered or beneficial shareowner of Common Stock at the close of business on February 29, 2016.28, 2017. We ask that shareowners request tickets in advance to attend. To request an admission ticket to the Annual Meeting, contactsend a letter to the UTC Corporate Secretary, at UTC, 10 Farm Springs Road, Farmington, CT 06032 or bysend an email to: corpsec@corphq.utc.com.corpsec@corphq.utc.com. | • | If you own shares through an account with a broker, bank, trustee or other intermediary, you must also send a copy of an account statement, or a “legal proxy” from your intermediary, showing the number of shares you owned as of the record date. | | | | | • | If your shares are registered in your name with UTC’s stock registrar and transfer agent, Computershare Trust Company, N.A. (“Computershare”), or if you own shares through a UTC employee savings plan, there is no need to provide evidence of ownership of shares.shares because UTC can verify your ownership of Common Stock. |
If you forget to bring a ticket, you will be admitted to the meeting only if you provide proof of identification and satisfactory evidence that you were a registered or beneficial shareowner of Common Stock as of the record date. 7678 | |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING QUORUM FOR THE MEETING Under the Company’s Bylaws, we can conduct business at the Annual Meeting only if the holders of a majority of the outstanding shares on the record date are present either in person or by proxy. The presence of at least that number of shares constitutes a “quorum.” As of the record date, 836,729,909801,686,761 shares of Common Stock were issued and outstanding. 
HOW TO VOTEVOTE? If you own shares directly in your name… If your shares are registered in your name on the records of Computershare, you may vote in several different ways. • | |  | |  | |  | Vote on the Internet.VOTE ON THE
INTERNET. | | VOTE BY TELEPHONE. | | VOTE BY MAIL. | | VOTE AT THE ANNUAL MEETING. | You can vote online at:www.proxyvote.com.www.proxyvote.com. | | | | • | Vote by Telephone.In the United States or Canada, you can vote by telephone. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. | | | | • | Vote by Mobile Device.You can scan the QR code provided with your proxy materials. |
Internet, telephone and mobile device voting facilities will be available 24 hours a day until 11:59 p.m., Eastern Daylight Time, on April 24, 2016 (except for participants in the UTC Employee Savings Plan, who must submit voting instructions earlier, as described below).
To authenticate your Internet, telephone or mobile device vote, you will need to enter your confidential voter control number as shown on the voting materials you received. If you vote online, by telephone or by mobile device, you do not need to return a proxy card or voting instruction card.
• | Vote by Mail.You can mail the proxy card or voting instruction form enclosed with your printed proxy materials. Mark, sign and date your proxy card or voting instruction form and return it in the postage-paid envelope we have provided, or in an envelope addressed to Vote Processing, c/o Broadridge Financial Solutions, 51 Mercedes Way, Edgewood, NY 11717. | | Most shareowners may vote by submitting a ballot in person at the Annual Meeting. | | Internet and telephone voting facilities will be available 24 hours a day until 11:59 p.m., Eastern Daylight Time, on April 23, 2017 (except for participants in the UTC Employee Savings Plan, who must submit voting instructions earlier, as described below). | | Please allow sufficient time for delivery of your proxy card if you decide to vote by mail. | | | | •To authenticate your Internet or telephone vote, you will need to enter your confidential voter control number as shown on the voting materials you received. If you vote online or by telephone, you do not need to return a proxy card or voting instruction card. | | Mail to Vote at the Annual Meeting.Most shareowners may vote by submitting a ballot in person at the Annual Meeting. Processing, c/o Broadridge Financial Solutions, 51 Mercedes Way, Edgewood, NY 11717. | | If you have already voted online, by telephone by mobile device or by mail, your vote at the Annual Meeting will supersede your prior vote. |
If you own your shares through an account with a bank, broker, trustee or other intermediary, sometimes referred to as owning in “street name”… Your intermediary will send you printed copies of the proxy materials or provide instructions on how to access proxy materials electronically. You are entitled to direct the intermediary how to vote your shares by following the voting instructions it provides to you. If you hold shares in the UTC Employee Savings Plan… You can direct the voting of your proportionate interest in shares of Common Stock held by the ESOP Fund and the Common Stock Fund under the UTC Employee Savings Plan by returning a voting instruction card or by providing voting instructions via the Internet by telephone or by mobile device.telephone. If you do not provide voting instructions (or if your instructions are incomplete or unclear) as to one or more of the matters to be voted on, the trustee will vote your proportionate interest in shares held by the ESOP Fund for the voting choice that receives the greatest number of votes based on voting instructions received from ESOP Fund participants. Similarly, the trustee will vote your uninstructed proportionate interest in shares held by the Common Stock Fund for the voting choice that receives the greatest number of votes based on voting instructions | Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 79 |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING received from the Common Stock Fund participants. The trustee will vote all shares of Common Stock held in the ESOP Fund that are not allocated to participant accounts for the voting choice that receives the greatest number of votes from ESOP Fund participants who submit voting instructions with respect to their allocated shares. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 77 |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
SPECIAL VOTING DEADLINE FOR PARTICIPANTS IN THE UTC EMPLOYEE SAVINGS PLAN:Broadridge Financial Solutions must receive your voting instructions by 11:00 a.m., Eastern Daylight Time, on April 21, 2016,20, 2017, so that it will have time to tabulate all voting instructions of participants and communicate those instructions to the trustee, who will vote the shares held by the Savings Plan. Because the trustee is designated to vote on your behalf, you will not be able to vote your shares held in the Savings Plan in person at the meeting. Revoking a proxy or voting instructionsREVOKING A PROXY OR VOTING INSTRUCTIONS
If you hold shares registered in your name, you may revoke your proxy by: | • | Writing to the Corporate Secretary and providing your name and account information | | | | | • | If you submitted your proxy by telephone mobile device or via the Internet, by accessing those voting methods and following the instructions given for revoking a proxy | | | | | • | If you submitted a signed proxy card, by submitting a new proxy card with a later date (which will override your earlier proxy card) | | | | | • | Voting in person at the Annual Meeting |
If you hold your shares in “street name,” you must follow the directions provided by your bank, broker, trustee or other intermediary for revoking or modifying your voting instructions. 
VOTING PROCEDURES How shares will be votedHOW SHARES WILL BE VOTED
Each share of UTC Common Stock is entitled to one vote (other than in the case of cumulative voting, as described below).vote. Your shares will be voted in accordance with your instructions. In addition, if you have returned a signed proxy card or submitted voting instructions by telephone mobile device or online,the Internet, the proxy holders will have, and intend to exercise, discretion to vote your shares (other than shares held in the UTC Employee Savings Plan) in accordance with their best judgment on any matters not identified in this Proxy Statement that are brought to a vote at the Annual Meeting. At present we do not know of any such additional matters. At the 2016 Annual Meeting, shareowners approved the Board’s recommendation to amend UTC’s Restated Certificate of Incorporation to eliminate cumulative voting in the election of directors. If your shares are registered in your name and you sign and return a signed proxy card or vote by telephone mobile device or onlinethe Internet, butdo notgive voting instructions on a particular matter, the proxy holders will be authorized to vote your shares on that matter in accordance with the Board’s recommendation. If you hold your shares through an account with a broker anddo notgive voting instructions on a matter, your broker is permitted, under the rules of the New York Stock Exchange your broker is permittedrules, to vote your shares in its discretion only on Proposal 2 (appointment of the Independent Auditor) and is required to withhold a vote on each of the other Proposals, resulting in a so-called “broker non-vote.” The impact of abstentions and broker non-votes on the overall votevoting results is shown in the table on the following table.page. 7880 | |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING Votes required and effect of abstentions and broker non-votes
VOTES REQUIRED AND EFFECT OF ABSTENTIONS AND BROKER NON-VOTES | Matter | | Vote Required Votefor Approval | | Impact of Abstentions | | Impact of Broker Non-Votes | | Election of Directors | | Votes FOR a nominee must exceed 50% of the votes cast with respect to that nominee. | | Not counted as votes cast; no impact on outcome. | | Not counted as votes cast; no impact on outcome. | Appointment of PricewaterhouseCoopers LLP to serve as Independent Auditor for 20162017 | | Approval by a majority of the votes making up the quorum. | | Counted toward quorum; impact is the same as a vote AGAINST. | | Not applicable. | AmendmentAdvisory vote to our Restated Certificate of Incorporation to Eliminate Cumulative Voting for Directors | | Approval by a majority of outstanding shares. | | Impact is the same as a vote AGAINST. | | Impact is the same as
a vote AGAINST.
| An Advisory Vote to Approveapprove Named Executive Officer compensation | | Votes FOR the proposal must exceed votes AGAINST it. | | Not counted as votes cast; no impact on outcome. | | Not counted as votes cast; no impact on outcome. | | Advisory vote on the frequency of shareowner votes on Named Executive Officer compensation | | The option for which the greatest number of votes is cast. | | Not counted as votes cast; no impact on outcome. | | Not counted as votes cast; no impact on outcome. |
Cumulative voting for directors(1)
You have the right to “cumulate” your votes in the election of UTC directors. This means you are entitled in the election of directors to a number of votes equal to the number of shares of Common Stock you own, multiplied by the number of directors to be elected. You may cast all of these votes for a single nominee or distribute them among any two or more nominees, in your discretion.
If your shares are registered in your name and you wish to exercise cumulative voting rights, you must submit a proxy card by mail or attend the Annual Meeting and vote in person by ballot. Your proxy card or ballot must specify how you want to allocate your votes among the nominees. The telephone, mobile device and Internet voting facilities do not accommodate cumulative voting.
If you own your shares in “street name,” contact your broker, bank, trustee or other intermediary for directions on how to exercise cumulative voting rights using the voting instruction card, or to request a legal proxy so you can vote your shares directly.
The Board of Directors is soliciting discretionary authority to cumulate votes with respect to the election of directors. If shareowners (other than UTC Employee Savings Plan participants) return a signed proxy card or submit voting instructions without providing instructions about cumulative voting, or if shareowners (other than UTC Employee Savings Plan participants) vote by telephone, mobile device or via the Internet, they will confer on the designated proxy holders discretionary authority to exercise cumulative voting. Under this discretionary authority, the designated proxy holders may, if they elect to do so, allocate the aggregate number of votes (other than votes in respect of shares held in the UTC Employee Savings Plan) among the nominees in the manner recommended by the Board of Directors or otherwise determined by the proxy holders. However, the proxy holders will not cast any votes for any nominee for whom you have given instructions to vote against or withhold a vote.
If you do not wish to grant the proxy holders authority to cumulate your votes in the election of directors, you must explicitly state that objection on your proxy card or voting instruction card. The telephone, mobile device and Internet voting facilities do not accommodate objections to granting that authority.
(1) | Although the Board has submitted a proposal included at pages 72 to 73 of this Proxy Statement to be voted upon by shareowners at the 2016 Annual Meeting to eliminate cumulative voting in the future, currently shareowners have the right to cumulate their votes. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 79 |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
VOTE COUNTING Broadridge Financial Solutions (“Broadridge”), an independent entity, will receive and tabulate the votevotes in connection with the Annual Meeting. Representatives of Broadridge will act as the independent Inspectors of Election and in this capacity will supervise the voting, decide the validity of proxies and certify the results. Broadridge has been instructed that the vote of each shareowner must be kept confidential and may not be disclosed, (exceptexcept in legal proceedings or for the purpose of soliciting shareowner votes in a contested proxy solicitation).solicitation. INFORMATION ABOUT PROXY SOLICITATION Employees of UTC may solicit proxies on behalf of the Board of Directors by mail, email, in person and by telephone. These employees will not receive any additional compensation for these activities. UTC will bear the cost of soliciting proxies and will reimburse banks, brokers, trustees and other intermediaries for their reasonable out-of-pocket expenses for forwarding proxy materials to shareowners. UTC has retained Georgeson Inc., to assist in distributing proxy materials and soliciting proxies for a fee of $16,000 plus out-of-pocket expenses. ELECTRONIC ACCESS TO PROXY MATERIALS If you hold shares registered in your name, you may sign up at:athttp://www.computershare-na.com/greento receive electronic access to proxy materials for future meetings, rather than receiving mailed copies.the materials in the mail. If you choose electronic access, you will receive an email notifying you when the Annual Report and Proxy Statement are available with electronic linksinstructions on how to access the documents (in PDF and HTML formats) on a website and instructions on how to vote online. Your enrollment for electronic access will remain in effect unless you cancel it, which you can do up to two weeks before the record date for any future annual meeting. If you own your shares in “street name,” you may be able to obtain electronic access to proxy materials by contacting your broker, bank, trustee or other intermediary, or by contacting Broadridge at:athttp://enroll.icsdelivery.com/utc.utc. | Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 81 |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING ELIMINATING DUPLICATE MAILINGS If you share an address with one or more other UTC shareowners, you may have received notification that you will receive only a single copy of the Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials for your entire household unless you or another UTC shareowner at that address gives contrary instructions to UTC’s stock registrar and transfer agent or to the bank, broker, trustee or other intermediary that provides the notification. This practice, known as “householding,” is designed to reduce printing and mailing costs. Upon written or oral request, UTC will deliver promptly a separate copy of the Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials to any shareowner at a shared address to which the Company delivered a single copy of any of these documents. If you wish to receive free of charge a separate Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials this year or in the future, or if you are receiving multiple copies at your address and would like to enroll in “householding,” please contact UTC’s stock registrar and transfer agent, Computershare, Trust Company, at 1-800-488-9281. If you own your shares in “street name,” please contact your broker, bank, trustee or other intermediary to make your request. SUBMITTING PROPOSALS AND NOMINATIONS FOR 20172018 ANNUAL MEETING Shareowner Proposals.In order for a shareowner proposal to be considered for inclusion in UTC’s Proxy Statement for the 20172018 Annual Meeting under SEC Rule 14a-8, our Corporate Secretary must receive such proposal in writing by November 15, 2016.10, 2017. 80 | |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
In order to introduce a proposal for vote at the 20172018 Annual Meeting (other than a shareowner proposal included in the proxy statementProxy Statement in accordance with SEC Rule 14a-8), UTC’s Bylaws require that the shareowner send advance written notice to the Corporate Secretary for receipt no earlier than December 26, 201625, 2017 and no later than January 25, 2017.24, 2018. This notice must include the information specified by Section 1.10 of the Bylaws, a copy of which is available at:athttp://www.utc.com/Our-Company/Who-We-Are/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx.default.aspx. Director Nominations at the 20172018 Annual Meeting.UTC’s Bylaws require that a shareowner who wishes to nominate a candidate for election as a director at the 20172018 Annual Meeting (other than pursuant to the “proxy access” provisions of Section 1.12 of the Bylaws) must send advance written notice to the Corporate Secretary for receipt no earlier than December 26, 201625, 2017 and no later than January 25, 2017.24, 2018. This notice must include the information, documents and agreements specified by Section 1.10 of the Bylaws, a copy of which is available at:athttp://www.utc.com/Our-Company/Who-We-Are/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx.default.aspx. Director Nominations by Proxy Access.UTC’s Bylaws require that an eligible shareowner who wishes to have a nominee of that shareowner included in UTC’s proxy materials for the 20172018 Annual Meeting pursuant to the “proxy access” provisions of Section 1.12 of the Bylaws must send advance written notice to the Corporate Secretary for receipt no earlier than October 14, 201611, 2017 and no later than November 15, 2016.10, 2017. This notice must include the information, documents and agreements specified by Section 1.12 of the Bylaws, a copy of which is available at:athttp://www.utc.com/Our-Company/Who-We-Are/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx.default.aspx. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners82 | 81 |
Other Information Cautionary Note Concerning Factors That May Affect Future Results.ThisThis Proxy Statement contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases and other measures of financial performance or potential future plans, strategies or transactions. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: | • | the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, the impact of weather conditions and natural disasters and the financial condition of our customers and suppliers; | | | | | • | challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; | | | | | • | future levels of indebtedness and capital spending and research and development spending; | | | | | • | future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; | | | | | • | the timing and scope of future repurchases of our common stock, which may be suspended at any time due to market conditions and the level of other investing activities and uses of cash; | | | | • | delays and disruption in delivery of materials and services from suppliers; | | | | | • | customer-Company and Company-directedcustomer-directed cost reduction efforts and restructuring costs and savings and other consequences thereof; | | | | | • | the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into our existing businesses and realization of synergies and opportunities for growth and innovation; | | | | | • | new business opportunities; | | | | | • | our ability to realize the intended benefits of organizational changes; | | | | | • | the anticipated benefits of diversification and balance of operations across product lines, regions and industries; | | | | | • | the timing and scope of future repurchases of our common stock; | | | • | the outcome of legal proceedings, investigations and other contingencies; | | | | | • | pension plan assumptions and future contributions; | | | | | • | the impact of the negotiation of collective bargaining agreements and labor disputes; | | | | | • | the effect of changes in political conditions in the U.S. and other countries in which we operate;operate, including the effect of changes in U.S. trade policies or the U.K.’s pending withdrawal from the EU, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; and |
82Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | |
OTHER INFORMATION the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we operate. In addition, our 20152016 Annual Report onor Form 10-K includes important information as to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. See the “Notes to Consolidated Financial Statements” under the heading “Note 17:18: Contingent Liabilities,” and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Business Overview,” “Results of Operations,” “Liquidity and Financial Condition,” and “Critical Accounting Estimates”Estimates,” in Exhibit 13 toof our 20152016 Form 10-K. Our Form 10-K also includes important information as to these factors in the “Business” section under the headings “General,” “Description of Business by Segment” and “Other Matters Relating to Our Business as a Whole,” in the section titled “Risk Factors,” and in the “Risk Factors” and “Legal Proceedings” section.sections. Additional important information as to these factors is included in Exhibit 13 to our 2015 Form 10-K2016 Annual Report in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Restructuring Costs,” “Environmental Matters” and “Governmental Matters.” The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the SEC. Annual Report on Form 10-K for 2015.2016.UTC will provide, without charge, a copy of the UTC Annual Report on Form 10-K for 20152016 filed with the SEC to any shareowner upon request directed to:to the UTC Corporate Secretary United Technologies Corporation,by mail, 10 Farm Springs Road, Farmington, CT 06032, Telephone 1-860-728-7870,06032; by telephone 1-860-728-7870; or by email to: corpsec@corphq.utc.com.atcorpsec@corphq.utc.com. Corporate Governance Information and Code of Ethics.UTC’s Corporate Governance Guidelines and the charters for each Board Committee are available on UTC’s website:website athttp://www.utc.com/Our-Company/Who-We-Are/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspxdefault.aspx.UTC’s Code of Ethics is available on UTC’s website:website athttp://www.utc.com/Our-Company/How-We-Work/Ethics-And-Compliance/Pages/Code-of-Ethics.aspx. default.aspx.Printed copies will be provided, without charge, to any shareowner upon request addressed to the Corporate Secretary. The Code of Ethics applies to all directors and employees, including the principal executive, financial and accounting officers. Shareowners and other interested persons may send communications to the Board, the Chairman,Lead Director, or one or more non-management directors by using the contact information provided on UTC’s website by accessing sequentially “Who We Are,” “Corporate Governance,” “Board of Directors,” “Contact UTC’s Board.” Shareowners and interested persons also may send communications by letter addressed to the UTC Corporate Secretary, at UTC, 10 Farm Springs Road, Farmington, CT 06032 or by contacting the UTC Ombudsman at 1-800-871-9065. These communications will be received and reviewed by UTC’s Global Ethics and Compliance Office. The receipt of concerns about UTC’s accounting, internal controls, auditing matters or business practices will be reported to the Audit Committee. The receipt of other concerns will be reported to the appropriate Committee(s) of the Board. UTC employees also can raise questions or concerns confidentially or anonymously using UTC’s Ombudsman/DIALOGOmbudsman program. Transactions with Related Persons.UTC has adopted a written policy for the review of transactions with related persons. The policy requires review, approval or ratification of transactions exceeding $120,000 in which UTC is a participant and in which a UTC director, executive officer, a beneficial owner of five percent or more of UTC’s outstanding shares, or an immediate family member of any of the foregoing persons has a direct or indirect material interest. Any such transactions must be reported for review by the Corporate Secretary and the Corporate Vice President, Global Compliance, who will determine whether the transaction may beis a transaction with a related person, as such term is defined under UTC’s policy and the relevant SEC rules. Following this review, by these officers, the Board’s Committee on NominationsGovernance and GovernancePublic Policy (the “Committee”) must determine whether the transaction can be approved or not, based on whether the transaction is determined to be in, or not inconsistent with, the best interests of UTC and its shareowners. In making this determination, the Committee must take into consideration whether the transaction is on terms no less favorable to UTC than those Proxy Statement and Notice of 2016 Annual Meeting of Shareowners84 | 83 |
OTHER INFORMATION than those available with other parties and the related person’s interest in the transaction. UTC’s policy generally permits employment of relatives of related persons possessing qualifications consistent with UTC’s requirements for non-related persons in similar circumstances, provided the employment is approved by the Executive Vice President & Chief Human Resources Officer and the Corporate Vice President, Global Compliance. State Street Corporation (“State Street”), acting in various fiduciary capacities, filed a Schedule 13G with the SEC reporting that as of December 31, 20152016, State Street and certain of its subsidiaries collectively were the beneficial owners of more than five percent of UTC’s outstanding shares of Common Stock. A subsidiary of State Street is the trustee for the UTC Employee Savings Plan Master Trust. Other State Street subsidiaries provide investment management services. During 2015,2016, the UTC Employee Savings Plan Master Trust paid State Street and its subsidiaries approximately $2.2$1.6 million for services as trustee, as investment managers and for administrative and other services. BlackRock, Inc. (“BlackRock”) filed a Schedule 13G with the SEC reporting that as of December 31, 20152016, BlackRock and certain subsidiaries collectively were the beneficial owners of more than five percent of UTC’s outstanding shares of Common Stock. During 2015,2016, BlackRock acted as an investment manager for certain assets within UTC’s pension plans and Employee Savings Plan. BlackRock received approximately $2.9$2.7 million for such services. William Sullivan, an employee of UTC Aerospace Systems, is the son-in-law of John V. Faraci, a UTC Director. In 2016, Mr. Sullivan received approximately $143,000 in total compensation, consisting of his salary and participation in employee benefit plans and programs generally made available to employees of similar responsibility levels. Mr. Sullivan’s total compensation is consistent with what is provided to other employees with similar qualifications, experience and responsibilities. This transaction was reviewed and ratified by the Committee in accordance with UTC’s Related Person Transactions policy. Each of the relationships described above was reviewed and approved in accordance with UTC’s policy for review of transactions with related persons. Garrett Griffiths, an employee of Pratt & Whitney (“P&W”), is the son-in-law of P&W President Robert F. Leduc, an executive officer of UTC. In 2016, Mr. Griffiths received approximately $123,000 in total compensation, consisting of his salary and participation in employee benefit plans and programs generally made available to employees of similar responsibility levels. UTC management became aware of and notified the Committee in January 2017 that the related person transactions approval process was not followed by P&W in this instance, in that the transaction was not presented to the Committee for prior review and approval. The Committee determined, based on a review of the facts and circumstances, that the transaction is not inconsistent with the best interests of UTC and its shareowners, and thereafter ratified the transaction. In making this determination, the Committee took into consideration the following: (1) Mr. Griffiths possesses the requisite skills and qualifications consistent with UTC’s policies and practices for employment of non-related persons in similar positions; (2) initial employment of Mr. Griffiths was on terms no less favorable to P&W than terms offered to non-related persons under the same or similar circumstances; (3) Mr. Griffiths’ total compensation is consistent with what is provided to other employees with similar qualifications, experience and responsibilities; and (4) the transaction was reviewed by the UTC Executive Vice President & Chief Human Resources Officer and the UTC Corporate Vice President, Global Compliance, who both determined that there were no willful or intentional violations of the UTC Corporate Governance Guidelines. The Committee also reviewed the facts and circumstances pertaining to the failure of the transaction to have been presented to the Committee in a timely manner, and approved UTC’s corrective actions focused on additional internal training and communications regarding the related persons transactions policy and approval process. Section 16(a) Beneficial Ownership Reporting.Reporting Compliance.Section 16(a) of the Securities Exchange Act of 1934, as amended, requires certain of our officers, as well as each director and any beneficial owner of more than ten percent of UTC Common Stock to file reports with the SEC regarding their holdings and transactions in UTC’s equity securities. Based upon a review of these reports as filed with the SEC during or with respect to 2015,2016, and upon written confirmation from our directors and officers, we believe that each director and covered officer met these filing requirements.requirements, except that there | Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 85 |
OTHER INFORMATION were inadvertent delays in reporting the following: (i) the acquisition of shares of UTC Common Stock by David R. Whitehouse, Corporate Vice President, Treasurer, upon the vesting and disposition of restricted stock units; (ii) the acquisition of deferred stock units by Fredric G. Reynolds, a UTC director, upon his appointment as a member of the Audit Committee of the Board; (iii) purchases by John V. Faraci, a UTC director, of shares of UTC Common Stock through six transactions through a broker-managed account during the period from June 2015 through December 2015; and (iv) the later sale by Mr. Faraci of those shares through three transactions during the period from October 2015 through February 2016. In each case, the required reports of these transactions were subsequently filed with the SEC. UTC is not aware of any beneficial owners of more than ten percent of UTC Common Stock. Incorporation by Reference.In connection with our discussion of director and executive compensation, we have incorporated by reference in this Proxy Statement certain information from Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 20152016 Annual Report on Form 10-K filed on February 11, 2016;9, 2017; these are the only portions of such filings that are incorporated by reference in this Proxy Statement. Company Names, Trademarks and Trade Names.United Technologies Corporation and its subsidiaries’ names, abbreviations thereof, logos, and product and service designators are either the registered or unregistered trademarks or trade names of United Technologies Corporation and its subsidiaries. Names of other companies, abbreviations thereof, logos of other companies, and product and service designators of other companies are either the registered or unregistered trademarks or trade names of their respective owners. 8486 | |
Appendix AA: PROPOSED AMENDMENT TO UTC’S
RESTATED CERTIFICATE OF INCORPORATION
The Restated Certificate of Incorporation of United Technologies Corporation would be amended and restated to reflect the following amendment, in order to delete the current text included in Clause (h) of Article Eighth and replace that text with “[Reserved]”:
(h)At all elections of directors of the Corporation, each holder of Common Stock shall be entitled to as many votes as shall equal the number of his shares of such stock multiplied by the number of directors to be elected by the holders of Common Stock, and he may cast all of such votes for a single director or may distribute them among the number to be voted for by the holders of the Common Stock, or any two or more of them as he may see fit. [Reserved].
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 85 |
Appendix B
Reconciliation of Non-GAAP Measures to Corresponding GAAP Measures United Technologies Corporation
| Reconciliation of Net Sales to Adjusted Net Sales | | | | | | | | | | | | | | | | | | | | | | (dollars in millions) | | | 2016 | | | | 2015 | | | | 2014 | | | Net sales | | | $57,244 | | | | $56,098 | | | | $57,900 | | | Adjustments to net sales: | | | | | | | | | | | | | | Pratt & Whitney – charge resulting from customer contract negotiations | | | $184 | | | | $142 | | | | — | | | UTC Aerospace Systems – charge resulting from customer contract negotiations | | | — | | | | $210 | | | | — | | | Adjusted net sales | | | $57,428 | | | | $56,450 | | | | $57,900 | |
Reconciliation of 2016 Net Sales to Adjusted Net Sales by Business Segment | (dollars in millions) | | 2015 | | 2014 | | 2013 | | | UTC Climate,
Controls &
Security | | | Otis | | | Pratt &
Whitney | | | UTC
Aerospace
Systems | | | Segment
Sales | | | Eliminations
& Other | | | Consolidated
Net Sales | | | Net sales | | $56,098 | | $57,900 | | $56,600 | | | | $16,851 | | | | $11,893 | | | | $14,894 | | | | $14,465 | | | | $58,103 | | | | ($859) | | | | $57,244 | | | Adjustments to net sales: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pratt & Whitney – charge resulting from customer contract negotiations | | $142 | | — | | — | | | | — | | | | — | | | | $184 | | | | — | | | | $184 | | | | — | | | | $184 | | | UTC Aerospace Systems – charge resulting from customer contract negotiations | | $210 | | — | | — | | | | Adjusted net sales | | $56,450 | | $57,900 | | $56,600 | | | | $16,851 | | | | $11,893 | | | | $15,078 | | | | $14,465 | | | | $58,287 | | | | ($859) | | | | $57,428 | |
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Shareowners and Adjusted Diluted Earnings per Share to Corresponding GAAP Measures | (dollars in millions, except per share amounts) | | 2015 | | 2014 | | 2013 | | | 2016 | | | 2015 | | | 2014 | | | Net income attributable to common shareowners | | $7,608 | | $6,220 | | $5,721 | | | | $5,055 | | | | $7,608 | | | | $6,220 | | | Less: Income from discontinued operations attributable to common shareowners | | -$3,612 | | -$154 | | -$456 | | | | $10 | | | | ($3,612) | | | | ($154) | | | Net income from continuing operations attributable to common shareowners | | $3,996 | | $6,066 | | $5,265 | | | | $5,065 | | | | $3,996 | | | | $6,066 | | | Adjustments to net income from continuing operations attributable to common shareowners: | | | | | | | | | | | | | | | | | | | | | Restructuring costs | | $396 | | $354 | | $431 | | | | $290 | | | | $396 | | | | $354 | | | Significant non-recurring and non-operational charges (gains) | | $1,446 | | -$240 | | -$271 | | | | $550 | | | | $1,446 | | | | ($240) | | | Significant non-recurring and non-operational items included in net interest expense | | | | $140 | | | | — | | | | — | | | Income tax expense (benefit) on restructuring costs and significant non-recurring and non-operational items | | -$617 | | -$7 | | -$38 | | | | ($354) | | | | ($617) | | | | ($7) | | | Significant non-recurring and non-operational charges (gains) recorded within income tax expense | | $342 | | -$284 | | -$154 | | | | ($231) | | | | $342 | | | | ($284) | | | Total adjustments to net income from continuing operations attributable to common shareowners | | $1,567 | | -$177 | | -$32 | | | | $395 | | | | $1,567 | | | | ($177) | | | Adjusted net income from continuing operations attributable to common shareowners | | $5,563 | | $5,889 | | $5,233 | | | | $5,460 | | | | $5,563 | | | | $5,889 | | | Weighted average diluted shares outstanding | | 883 | | 912 | | 915 | | | | 826 | | | | 883 | | | | 912 | | | Diluted earnings per share — net income attributable to common shareowners | | $8.61 | | $6.82 | | $6.25 | | | | $6.12 | | | | $8.61 | | | | $6.82 | | | Net income from discontinued operations | | $4.09 | | $0.17 | | $0.50 | | | | ($0.01) | | | | $4.09 | | | | $0.17 | | | Diluted earnings per share—Net income from continuing operations attributable to common shareowners | | $4.53 | | $6.65 | | $5.75 | | | | Diluted earnings per share—net income from continuing operations attributable to common shareowners | | | | $6.13 | | | | $4.53 | | | | $6.65 | | | Impact of non-recurring and non-operational charges (gain) on diluted earnings per share | | $1.77 | | -$0.19 | | -$0.03 | | | | $0.48 | | | | $1.77 | | | | ($0.19) | | | Adjusted diluted earnings per share—Net income from continuing operations attributable to common shareowners | | $6.30 | | $6.46 | | $5.72 | | | | Adjusted diluted earnings per share—net income from continuing operations attributable to common shareowners | | | | $6.61 | | | | $6.30 | | | | $6.46 | |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 87 |
APPENDIX A Reconciliation of Cash Flow From Operating Activities of Continuing Operations to Free Cash Flow | (dollars in millions) | | 2015 | | 2014 | | 2013 | | | Cash flow provided by operating activities of continuing operations | | $6,698 | | $6,994 | | $7,314 | | | Less: Capital expenditures | | $1,652 | | $1,594 | | $1,569 | | | Free cash flow from continuing operations | | $5,046 | | $5,400 | | $5,745 | | | Net income from continuing operations attributable to common shareowners | | $3,996 | | $6,066 | | $5,265 | | | Free cash flow from continuing operations as a percentage of net income from continuing operations attributable to common shareowners | | 126% | | 89% | | 109% | |
86 | |
APPENDIX B
| (dollars in millions) | | 2016 | | 2015 | | | 2014 | | | Cash flow provided by operating activities of continuing operations | | | $6,412 | | | $6,755 | | | | $6,979 | | | Less: Capital expenditures | | | $1,699 | | | $1,652 | | | | $1,594 | | | Free cash flow from continuing operations | | | $4,713 | | | $5,103 | | | | $5,385 | | | | | | | | | | | | | | | | Reconciliation of 2016 Full-Year Organic Sales | | | 2016 | | | | | | | | | | Organic volume | | | 2% | | | | | | | | | | Foreign currency translation | | | (1%) | | | | | | | | | | Acquisitions and divestitures, net | | | 1% | | | | | | | | | | Other | | | — | | | | | | | | | | Total % change | | | 2% | | | | | | | | |
United Technologies Corporation (the “Company”) reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). However, management believes that We supplement the reporting of our financial information determined under GAAP with certain non-GAAP financial measures provide usersinformation. The non-GAAP information presented provides investors with additional meaningful financialuseful information, thatbut should not be considered when assessingin isolation or as substitutes for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with those companies. We encourage investors to review our ongoing performance.financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Adjusted Net Sales, Adjusted Net Income, Adjusted Dilutednet sales, organic sales, adjusted net income and adjusted diluted EPS and Free Cash Flow are non-GAAP financial measures. Adjusted Net Salesnet sales represents Net Salesconsolidated net sales from continuing operations (a GAAP measure), excluding significant items of a non-recurring and non-operational nature.nature (hereinafter referred to as “other significant items”). Organic sales represents consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items. Adjusted Net Incomenet income represents net income from continuing operations (a GAAP measure), excluding restructuring costs and other significant items of a non-recurring and non-operational nature.items. Adjusted Diluteddiluted EPS represents diluted earnings per share from continuing operations (a GAAP measure), excluding restructuring costs and other significant items of a non-recurring and non-operational nature. Free Cash Flow represents cash flow from operating activities of continuing operations less capital expenditures.items. Management believes Adjusted Net Sales, Adjusted Net Income, Adjusted Diluted EPSthat the non-GAAP measures just mentioned are useful in providing period to periodperiod-to-period comparisons of the results of the Company’s ongoing operational performance. Free cash flow is a non-GAAP financial measure that represents cash flow from operations (a GAAP measure) less capital expenditures. Management believes Free Cash Flowfree cash flow is a useful measure of liquidity and an additional basis for assessing the Company’sUTC’s ability to fund its activities, including the financing of acquisitions, debt service, repurchases of UTC’s common stock and distribution of earnings to shareowners. The preceding tables provide ashareholders. A reconciliation of thesethe non-GAAP measures to the corresponding amounts prepared in accordance with generally accepted accounting principles.GAAP appears in the tables above and on the prior page. The tables provide additional information as to the items and amounts that have been excluded from the adjusted measures. Adjusted Net Sales, Adjusted Net Income, Adjusted Diluted EPS and Free Cash Flow should not be considered in isolation or as substitutes for analysis of the Company’s results as reported in accordance with GAAP. Other companies may calculate Adjusted Net Sales, Adjusted Net Income, Adjusted Diluted EPS and Free Cash Flow differently than the Company does, limiting the usefulness of those measures for comparisons with other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. Our non-GAAP financial information does not represent a comprehensive basis of accounting.
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners88 | 87 |
Appendix B: Financial Performance Metrics Used in Incentive Compensation Plans All performance metrics are based on continuing operations, unless otherwise noted. | Plan | | Performance Metric | | UTC | | Business Units | | | | | | | | ANNUAL INCENTIVE | | Earnings Metric | | Adjusted net income, as defined below. | | Earnings before interest and taxes less: • Restructuring costs; • Non-recurring items; • Significant, defined non-operational items; and • Impact of significant acquisitions/ divestitures. | | | Free Cash Flow Metric | | Consolidated net cash flow provided by operating activities, less capital expenditures (both as reported in the 2016 Annual Report on Form 10-K), adjusted for restructuring, non-recurring and other significant, defined non-operational items. | Internal measure based on consolidated net cash flow provided by operating activities, less capital expenditures and adjusted for restructuring, non-recurring and other significant, defined non-operational items. | | | Adjusted Net Income Metric | | UTC’s net income from continuing operations attributable to common shareowners (as reported in the 2016 Annual Report on Form 10-K), adjusted for restructuring, non-recurring and other significant, defined non-operational items. | Internal measure consisting of each business unit’s respective share of UTC net income attributable to common shareowners, but excluding restructuring, non-recurring and other significant, defined non-operational items. | LONG-TERM INCENTIVE | | Adjusted Earnings Per Share Metric | | Diluted earnings per share, subject to adjustments for restructuring, non-recurring and other significant, defined non-operational items. | | | Return on Invested Capital Metric | | Quarterly average, net operating profit after tax (“NOPAT”), adjusted for non-controlling interest, non-service pension, acquisitions and divestiture earnings, one-timers, restructuring, material one-time tax charges and the impact of foreign exchange fluctuations, divided by invested capital, adjusted for accumulated other comprehensive income, cash and equivalents, acquisition and divestiture borrowings, short-term borrowings and material one-time tax charges. | | | Total Shareowner Return Metric | | Total investment return on Common Stock between two points in time, using a trailing 60-day average, calculated to account for changes in share price and reinvested dividends. |
| Notice of 2017 Annual Meeting of Shareowners and Proxy Statement | 89 |
10 Farm Springs Road
Farmington, CT 06032 USA
www.utc.com Otis
Pratt & Whitney
UTC Aerospace Systems
UTC Climate, Controls & Security  
UNITED TECHNOLOGIES CORPORATION
10 FARM SPRINGS ROAD
FARMINGTON, CT 06032 | | |  | SCAN TO
VIEW MATERIALS & VOTE |  | | | |
VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above. Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 p.m. EDT the day before the meeting dateon April 23, 2017, or the earlier cut-off date and timeuntil 11:00 a.m. EDT on April 20, 2017, for Savings Plan Participants.participants in a UTC employee savings plan. Follow the instructions on the website to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our companyCompany incurs in mailing proxy materials, you can consent to receivingreceive all future proxy statements, proxy cards and annual reports electronically via email or the Internet.electronically. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY TELEPHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. EDT the day before the meeting dateon April 23, 2017, or the earlier cut-off date and time mentioned above for Savings Plan Participants.participants in a UTC employee savings plan. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it toin your own envelope by mailing it to: Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | E18662-P84637 | KEEP THIS PORTION FOR YOUR RECORDS | | DETACH AND RETURN THIS PORTION ONLY |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
E00129-P71919-Z66951 KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATEDDATED. UNITED TECHNOLOGIES CORPORATION
| | | | | | | | | | | | | | THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR EACH OF THE FOLLOWING NOMINEES ANDFOR PROPOSALS 2, 3 AND 4.UNITED TECHNOLOGIES CORPORATION | | | | | | | | | | | | | | | | | | | | | | | | | 1. | Election of Directors | | ForTHE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR
EACH OF THE FOLLOWING NOMINEES,FOR PROPOSALS
2 AND 3, AND1 YEAR FOR PROPOSAL 4. | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1. | Election of Directors | | | For | Against | Abstain | | | | | | | | | | | 1a. | John V. FaraciLloyd J. Austin III | o | o | o | | o | | o | | | | | | | | | | | | | | | | | | | | | | | 1b. | Jean-Pierre GarnierDiane M. Bryant | o | o | o | | o | | o | For | Against | Abstain | | | | | | | | | | | | | | | | | | | | 1c. | Gregory J. HayesJohn V. Faraci | o | o | o | | | 1j. Fredric G. Reynolds | | o | o | o | | o | | | | | | | | | | | | | | | | | | | 1d. | Edward A. KangasJean-Pierre Garnier | o | o | o | | | 1k. Brian C. Rogers | | o | o | o | | o | | | | | | | | | | | | | | | | | | | 1e. | EllenGregory J. KullmanHayes | o | o | o | | | 1l. Christine Todd Whitman | | o | o | o | | o | | | | | | | | | | | | | | | | | | | 1f. | Marshall O. LarsenEdward A. Kangas | o | o | o | | 2. | Appointment of PricewaterhouseCoopers LLP to serve as Independent Auditor for 2017. | o | o | o | | o | | | | | | | | | | | | | | | | | | | 1g. | Harold McGraw IIIEllen J. Kullman | o | o | o | | 3. | Advisory vote to approve Named Executive Officer compensation. | o | o | o | | o | | | | | | | | | | | | | | | | | | | 1h. | Richard B. MyersMarshall O. Larsen | o | o | o | | | | 1 YEAR | 2 YEARS | 3 YEARS | Abstain | | | | | | | | | | 4. | Advisory vote on the frequency of shareowner votes | o | o | o | o | | | | 1i. | Harold McGraw III | o | o | o | | o | on Named Executive Officer compensation. | | | | | | | | | | | | | | | | | | | | | | | | 1i. | Fredric G. Reynolds | | o | | o | | o | | | | | | | | | | | | | | | | | | | | | | | | | | | For address changes, please check this box and write them on the back where indicated. | | o | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | |
| | 1j. | Brian C. Rogers | | o | | o | | o | | | | | | | | | | | | | 1k. | H. Patrick Swygert | | o | | o | | o | | | | | | | | | | | | | 1l. | André Villeneuve | | o | | o | | o | | | | | | | | | | | | | 1m.Signature [PLEASE SIGN WITHIN BOX] | Christine Todd WhitmanDate | | o | | o | Signature (Joint Owners) | Date | | o | | | | | | | | | | | | 2. | Appointment of PricewaterhouseCoopers LLP to serve as Independent Auditor for 2016. | | o | | o | | o | | | | | | | | | 3. | Amendment to our Restated Certificate of Incorporation to eliminate cumulative voting for directors. | | o | | o | | o | | | | | | | | | 4. | An advisory vote to approve the compensation of our named executive officers. | | o | | o | | o | | | | | | | | |
V.1.1
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
| | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date |
Annual Meeting of Shareowners of United Technologies Corporation
Monday, April 25, 2016,24, 2017, 8:00 a.m. EDT
Held in the Palm Court Ballroom of The Vinoy®Renaissance St. Petersburg
501 5th Avenue NE, St. Petersburg, Florida 33701Held at UTC Aerospace Systems
Four Coliseum Centre, 2730 West Tyvola Road, Charlotte, North Carolina 28217 The purposes of the meeting are to consider the following matters: | | 1. | Election of the thirteentwelve director nominees listed in the Proxy Statement; |
| | | | | | 2. | Appointment of PricewaterhouseCoopers LLP to serve as Independent Auditor for 2016;2017; |
| | | | | | 3. | Amendment to our Restated Certificate of Incorporation to eliminate cumulative voting for directors; |
| 4. | An advisoryAdvisory vote to approve Named Executive Officer compensation; | | | | | | | 4. | Advisory vote on the compensationfrequency of our named executive officers;shareowner votes on Named Executive Officer compensation; and |
| | | | | | 5. | Other business, if properly raised. |
TICKET REQUESTS:We ask that shareowners request a ticket in advance to attend. Please email your request to:tocorpsec@corphq.utc.comor write to:to UTC Corporate Secretary, UTC, 10 Farm Springs Road, Farmington, CT 06032. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice of 2017 Annual Meeting of Shareowners and Proxy Statement and Notice andthe 2016 Annual Report are
available at:www.proxyvote.com. E00130-P71919-Z66951E18663-P84637
 | PROXY | |
This Proxy is Solicited on Behalf of the Board of Directors of United Technologies Corporation. The undersigned hereby appoints John V. Faraci, Edward A. Kangas and H. Patrick Swygert,Ellen J. Kullman, and each of them, each with power of substitution and revocation, as proxies for the undersigned to act and vote at the Annual Meeting of Shareowners of United Technologies Corporation to be held on April 25, 2016,24, 2017, and at any postponed or at any reconvened session following any adjournment thereof, as directed on this Proxy Card, upon the matters set forth on the reverse side hereof, all as described in the Proxy Statement, and, in their discretion, upon any other business whichthat may properly come before said meeting.If this Proxy Card is properly signed and returned, but nodoes not (other than for shares held by the trustee under each of the UTC employee savings plans) provide voting instructions, are given,then the votes represented by this Proxy Card will be applied invoted FOR the election of directors, as authorized in the following sentence, as votes for one or moreeach of the nominees, listed on the reverse and as votes for each ofFOR Proposals 2 and 3, and 4. Absent specific instructions to the contrary by the undersigned with respect to cumulative voting, the persons named as proxies herein shall have full discretionary authority to vote the shares represented by a properly signed and returned Proxy Card cumulatively for all or less than all of such nominees listed on the reverse and to allocate such votes among all or less than all of such nominees (other than any one or more nominees1 YEAR for whom instructions have been given to vote against or abstain) in the manner as the Board of Directors shall recommend or otherwise in the proxies’ discretion.Proposal 4. This Proxy Card also constitutes voting instructions to the Trusteetrustee under each of the UTC employee savings plans to vote, in person or by proxy, the proportionate interest of the undersigned in the shares of Common Stock of UTC held by the Trusteetrustee under any such plan(s) as described in the Proxy Statement. Such voting instructions, whether received by telephone, the Internet or as indicated by you on this card, must be received by 11:00 a.m. EDT on April 21, 2016.20, 2017.If voting instructions are not received by that time, the trustee will vote your uninstructed proportionate interest in plan shares will be voted by the Trustee as described in the Proxy Statement.The undersigned hereby revokes all proxies previously given by the undersigned to vote at the Annual Meeting of Shareowners or any adjournment or postponement thereof. You are encouraged to specify your choices by marking the appropriate boxes (SEE REVERSE SIDE), but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. The proxies designated above cannot vote these shares unless you sign and return this Proxy Card. (If you noted any Address Changes above, please mark the corresponding box on the reverse side.) V.1.1
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Carbon Disclosure Project
